1-0 for Colm Kelleher. Anyone who watched closely might not fail to see that the President of UBS was inwardly rejoicing at the historic media conference on Sunday evening.
Thanks to clever power play, he got almost everything he wanted: he bought the entire Credit Suisse for the bargain price of 3 billion francs. On top of that, there are federal guarantees worth at least 9 billion. And a liquidity reserve of the National Bank of 200 billion – half of which is guaranteed by the federal government. And UBS will be relieved by the devaluation of bonds by 16 billion.
And what does she pay in return? Apart from the ridiculously low purchase price, which was not even half of Credit Suisse’s already low market value on Sunday, UBS only bears a risk of loss of 5 billion for certain securities. Plus half the risk if the $9 billion federal guarantee isn’t enough.
Although Federal Council, National Bank and Financial Market Authority using emergency law breed a true monster they didn’t put any conditions on the new megabank. It does not have to meet higher capital requirements. And it is not obliged to sell Credit Suisse’s Swiss business once more following a transitional period or to list it on the stock exchange as an independent company.
From an economic point of view, this is the worst solution. Customers – especially small and medium-sized companies with international operations – no longer have a choice between two large banks, which are the only ones to offer the entire range of services. Employees are threatened with a loss of up to 10,000 jobs if the two largest banks merge their Swiss business. And the risk that at some point UBS will also have to be rescued with state money and trigger a financial crisis has increased significantly.
Politicians can threaten UBS with drastic intervention if they do not voluntarily agree to let Credit Suisse’s Swiss business become independent.
Politicians should use all means to prevent all of this. You have a lever: You can threaten the UBS management with drastic intervention if they do not voluntarily agree to let Credit Suisse’s Swiss business and possibly other parts of the business become independent.
The palette is on the table: a cap on wages and bonuses for top managers or even a ban on bonuses. Higher capital adequacy requirements. The introduction of an additional payment obligation for UBS shareholders, who would be obliged to increase the company’s capital in an emergency or to be liable for any losses incurred. The forced separation of the wealth management and corporate banking business from the investment bank. Or even the split of the new big bank into several smaller units.
Very few parliamentarians have yet recognized the opportunity that is now available to them. There is almost consensus that certain new state interventions are needed. And almost nobody doubts that it would be better if UBS does not incorporate Credit Suisse’s Swiss business.
But hardly anyone in Bundesbern has linked the two questions together to put pressure on UBS. If politicians were as clever as Colm Kelleher, they would do just that. Then it would suddenly be 1:1.
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– Politicians should force UBS to make Credit Suisse Switzerland independent
The largest bank emerged victorious from the rescue of the reeling number two. But now Parliament should turn the tables. Because there is a way to tame the monster.