The Swiss banking sector opens a new stage. UBS has completed on Monday the purchase of what was its great rival, Credit Suisse, thus putting an end to almost three months of uncertainty since on March 19, with the intervention of the Swiss authorities, the parties agreed to the largest bank merger in Europe after the financial crisis. The completion of the transaction, announced in an open letter published in Swiss and international media, ends Credit Suisse’s 167-year history and gives rise to a new giant bank. The combined market value will amount to 1.5 trillion dollars, a figure that will double the GDP of Switzerland.
“This is the beginning of a new chapter for UBS and for the global financial industry,” said UBS Chairman Colm Kelleher and the bank’s CEO Sergio Ermotti in the open letter to the press announcing the closure law of the operation. “We will combine the skills, scale and leadership in wealth management of UBS and Credit Suisse to create an even stronger integrated financial institution (…) We know that we will face challenges. But we also know that great opportunities will unfold from there,” they add.
As agreed, Credit Suisse shareholders have received one UBS share for every 22.48 shares held. The rescue agreement agreed on March 19 raised the amount of the operation to more than 3,000 million Swiss francs (3,090 million euros). Following the close of the merger, Credit Suisse shares will leave their place on the Zurich Stock Exchange’s selective Swiss Market Index (SMI) to those of Swiss transport and logistics group Kuehne+Nagel, which will begin trading on the index aa starting June 13. UBS shares rose more than 1.3% after the market open to 18.4 Swiss francs.
Last Friday, the Government of Switzerland and UBS signed an agreement whereby the public arcades will cover up to icion. Specifically, the public guarantee will take effect “only if the losses derived from the realization of these assets exceed 5,000 million Swiss francs (5,142 million euros)” and will be limited to a maximum of 9,000 million francs.
Thus, UBS will bear the impact of the first 5 billion Swiss francs of realized losses on a designated portfolio of Credit Suisse non-core assets, equivalent to approximately 3% of the combined assets of the merged bank and comprising mainly loans, derivatives, legacy assets and structured products from Credit Suisse’s non-core unit. The European Commission occurred on May 25 without conditions the merger between the Swiss financial institutions with the European economy (EEA).
As UBS explained in early May, once the legal closing of the Credit Suisse acquisition is complete, Credit Suisse will merge with UBS Group AG (UBS) and the combined entity will operate as a consolidated banking group, although UBS AG and Credit Suisse AG will continue to operate. operating independently for the foreseeable future and UBS will carry out an integration in stages. Thus, at the time of legal closure, a governance is contemplated whereby UBS Group AG will initially manage the two separate parent companies: UBS AG and Credit Suisse AG, each maintaining their own subsidiaries and branches, serving their clients. and dealing with counterparties. The agreement also includes the management of Credit Suisse’s private banking in Spain, despite the fact that a year ago the sale of its business to Singular Bank was arranged and a non-competition agreement was agreed.
The new team sets red lines
Pending further integration, Credit Suisse AG will continue to rely on its established risk control and governance frameworks, although some new policies will be put in place to ensure UBS Group has effective supervision. In addition, the UBS Group Board of Directors and the UBS Group Executive Board will have overall responsibility for the consolidated group. Sergio Ermotti.
Ulrich Körner, who had previously worked at UBS and was currently CEO of Credit Suisse AG, became a member of the UBS Group’s executive board after the transaction closed. Likewise, the entity announced that Todd Tuckner, current financial director and head of risk management of the wealth management area, would be appointed group financial director at the closing of the transactions becoming a member of the executive board of UBS with immediate effect after the decision of Sarah Youngwood to leave the firm after the transaction closes.
On the other hand, among the changes announced, the weight gained in the UBS structure by the Spanish Beatriz Martín Jiménez stands out, who left herself in charge of the Non-Core & Legacy area and president of the EMEA region (Europe, the Middle East and Africa). , in addition to continuing as UBS UK CEO and retaining her role as group treasurer until a successor is named. Iqbal Khan will remain Chairman of Global Wealth Management, Rob Karofsky will remain Chairman of Investment Bank, Sabine Keller-Busse will remain Chairman of Personal and Corporate Banking and Chairman of Switzerland, while Suni Harford will remain Chairman of Management. of Assets and Leader of Sustainability and Impact.
As part of the merger, UBS has imposed strict restrictions on Credit Suisse bankers, including a ban on new clients from high-risk countries and on complex financial products, the Financial Times reports. Prohibited activities include accepting clients from countries such as Libya, Russia, Sudan and Venezuela and launching new products without the approval of UBS managers.
Taken together, the list of restrictions covers 11 financial risks and 12 non-financial risks and, while many of the risks are operational, relating to issues such as research layout and office usage, other areas of Credit’s business Switzerland more directly. “We will never compromise UBS’s strong culture, conservative risk approach or quality service,” Colm Kelleher and Sergio Ermotti state in their open letter.