A photograph shows a logo of Swiss giant bank UBS in front of a logo of Credit Suisse bank in Zurich ... [+]
The necessary purchase of Credit Suisse by UBS is setting off typically discrete but significant shockwaves across Swiss banking.
As UBS shapes up to swallow CS there will be a remaking of the industry, with many of the medium sized Swiss banks the beneficiaries. Owing to overlap of clients, there will not be a direct translation of CS assets into UBS accounts. Instead, many wealthier clients of the two major Swiss banks who have multiple banking relationships, will look to other wealth players – Julius Baer for example, or in regions like Asia they may look to American or local players.
CS collapse
Another effect is a challenging labour market in Zurich, given the overlap between the two institutions. There are signs that this labour shock can be absorbed – last week EFG Bank announced the hiring of 50 additional relationship managers.
If greater market share for the medium sized wealth managers is one trend that is unfolding, we may also see greater consolidation in the area of asset management. Notably, GAM, which has fallen far, looks likely to be bought and there is likely a range of bidders for parts of the CSAM business. In general, our sense is that Swiss wealth managers will redouble their focus on private asset funds.
There are at least three other factors to consider. The first is the reputational damage to Switzerland and to the notion of ‘Finanzplatz Schweiz’ or the plan that the state has for its financial sector.
So far, the Swiss government’s response to the CS debacle has hardly been exemplary, and it has lost credibility. With other financial centres looking to compete more intensely with Zurich and Geneva, it may be no surprise to see weaker inflows to Switzerland. Of note here is the unresolved question of Russian money in the Swiss banking system.
Crypto valley
Then there is the role of Switzerland as Europe’s crypto valley – many of the key players here have suffered in the recent downturn, and a good number are still mired in regulatory oversight.
In summary, the discrete but powerful world of Swiss banking is entering int oa period of creative destruction following the announcement that UBS will buy CS – medium sized wealth managers are likely to benefit, there will be immense labour market churn and a scramble for new, higher end product in asset management.
