Competition law risks catching up with the heavy merger between Credit Suisse and UBS. Apart from the Swiss authorities, regulators in the EU, the United States and other countries might examine a possible dismantling of the future Swiss banking giant.
The forced union unveiled on March 19 by the Federal Council is dizzying: the merged entity will hold 5000 billion dollars in assets under management in the combined activities of wealth and asset management. It will therefore rank number two in the world for wealth management and number three internationally in asset management, according to documents published by the bank with the three keys.
In Switzerland too, the UBS Credit Suisse couple will be gigantic with 333 billion pro forma customer deposits, far ahead of other systemically important institutions such as Raiffeisen (208 billion deposits), the Cantonal Bank of Zurich (97 billion) and Postfinance (90.4 billion).
On March 19, Urban Angern, director of the Federal Financial Markets Supervisory Authority (Finma), explained that the competition policeman had the right to replace the Competition Commission (Comco). The latter is consulted “and Finma can make a decision taking into account financial stability”, he argued.
Since then, voices have been raised to demand more in-depth control. UBS “is far too big for Switzerland”, ex-federal councilor UDC Christoph Blocher told RTS on Sunday, hoping that “the cartel authorities will proceed to divide it”. Finance Minister Karin Keller-Sutter, for her part, told SRF that she would not rule out a separation of Credit Suisse’s Swiss activities in the longer term.
Save room for competition
Thomas Jordan is also more nuanced than the former Zurich tribune. “UBS will be a very big bank and the subject of competition will be important,” said the head of the Swiss National Bank (SNB) last Thursday. “We have to make sure that there will be enough room in Switzerland for banking competition in the future.”
Asked regarding possible business divestments to take competition rules into account, UBS declined to comment.
“In this exceptional case, Finma replaced Comco to analyze the operation, because it considered that this banking concentration was necessary to protect creditors”, explained to the AWP agency Isabelle Chabloz.
For the ordinary professor and holder of the chair of economic law at the University of Fribourg, “an in-depth analysis will be made of the various markets in which the two banks are active, in order to determine whether there is creation or reinforcement of a dominant position. If this were to be the case, the merger should still be able to be accompanied by charges, for example the sale of certain subsidiaries or certain activities”.
Christian Bovet, ordinary professor in the public law department at the University of Geneva and doctor of law, for his part recalled that Finma can make “an assessment from the aspect of the protection of depositors and not of competition law However, the law provides for a consultation of Comco”.
“We are in the exceptional situation where Finma decides and not Comco and we find ourselves with a form of immunity in terms of merger control. It is an exceptional situation which has never arisen before”, added Mr Bovet.
The EU and the United States might get involved
According to the latter, “following the merger between the two banks, the ordinary rules will apply to this new entity in terms of dominant position and abuse of dominant position. If the new bank were, for example, to abuse its dominant position in a certain activity and geographic region, Comco might intervene and impose fines for abuse of a dominant position”. The return to ordinary law will come into effect as soon as the merger becomes effective.
Abundant in this sense, Mrs Chabloz specified that “independently of Finma’s final decision, Comco will always be able to intervene in the future if UBS were to abuse its dominant position in the markets which will have been identified as problematic during the examination.”
As the new entity is active internationally, other regulators might get involved. “In the EU, the European Commission will intervene to assess any transfer operation. In the United States, the procedure is a little more complex with the intervention of the American competition authority”, the FTC or the Antitrust division, details Mr. Bovet. Regulators in Asia might also intervene.
“The Swiss rules say that the merged entity is immune under Swiss law, but for the European Commission there is still a merger and a concentration taking place,” said Bovet.
“The merger must still be notified to the foreign competition authorities”, recalled Ms. Chabloz, stressing that “it will then be up to these authorities to determine whether the merger can be authorized with or without charges”.
This article has been published automatically. Source: ats/awp
