2023-04-23 16:12:24
Despite the completion of the largest merger deal in the banking sector since the global financial crisis in 2008, after the acquisition of Credit Suisse by UBS, the largest bank in Switzerland, with the support of the government and the Swiss National Bank, concerns about the banking crisis in The country still looms large, which raises questions among investors about the repercussions of the crisis on the reliability of Swiss banking policies.
Will Switzerland remain a banking oasis for the world’s wealthy after this crisis?
Economists and banking experts believe that the collapse of Credit Suisse threatens Switzerland’s position and credibility as a stable country in the banking sector and a sustainable and attractive environment for investors and wealthy people around the world, noting that this position has begun to decline, which is in the interest of competing financial centers such as Singapore and Luxembourg.
On March 19, 2023, the Swiss regulatory authorities announced the acquisition of Credit Suisse by UBS for 3 billion Swiss francs ($3.23 billion), in a move facilitated by the Swiss federal government to avoid further turmoil that shook the global banking services market due to The collapse of Credit Suisse, which followed the collapse of three US banks.
Under the terms of the deal, Credit Suisse shareholders will receive one share of UBS for every 22.48 shares of Credit Suisse, which was founded 167 years ago and is among the largest wealth managers in the world, as the Swiss Central Bank agreed to provide A $100 billion liquidity line to the two banks as part of the deal.
Undermining investor confidence in the banking sector
In his interview with “Sky News Arabia Economy”, Raed Al-Khader, Head of the Financial Markets Research Department at the “Equity” Group, says that the Credit Suisse crisis is not limited to being just a problem in a bank that was suffering from strong financial crises, but rather destabilized investors’ confidence in the banking sector. As a whole, as one of the oldest financial institutions in Switzerland, many investors see it as part of the country’s identity.
He added that the UBS acquisition of Credit Suisse had increased the risks, as heavy losses could occur in the sector during the coming period in terms of jobs, as well as in terms of weakening competition in the financial sector, which represents more than 5 percent of the powers. operating in Switzerland.
A serious blow to Switzerland
Al-Khidr confirms that the collapse of Credit Suisse is not only related to a bank crisis within a country. This collapse dealt a serious blow to Switzerland’s qualifications as a global center for wealth management, which leads to questioning its reputation and declining its credibility with regard to stability and regulation.
Switzerland manages $2.6 trillion in financial assets globally, making it the largest financial center in the world before Britain and the United States. Therefore, the collapse of Credit Suisse will have dire repercussions on the global economy and financial stability in the coming period, according to Al-Khidr. , who confirmed that the “UBS” bank itself was suffering from financial distress during the global financial crisis, and needed intervention and rescue by the government after the mortgage crisis in the United States of America.
The head of the financial market research department in the “Equity” group explains, “The main problem lies in the fact that the control of one bank such as “UBS” after its acquisition of “Credit Suisse” in a country with a relatively medium economy causes an increase in risks, if the bank is exposed in the coming period. For any crisis related to deposit withdrawals, this may cause the collapse of the entire local economy, in addition to that everything that happens inside the bank will affect the banking sector, including 24 local banks, but UBS seeks to calm the market’s fears by indicating and emphasizing The strength of the bank’s general balance sheet, which will succeed in facing any crises that the bank may be exposed to, with strict regulatory laws in place.
Emergency law and political tensions
And a state of concern dominated the position of the banking sector in Switzerland as a pioneer in this field, after the government resorted to emergency law to proceed with the acquisition of “UBS” on “Credit Suisse”, which caused local political tensions between Parliament and the government.
However, despite attempts to intervene to prevent the collapse of the bank, which was supposed to be the beginning of the contagion of the banking crisis, Switzerland’s position began to decline as a leading country in this field with the continuing tensions it faced, and in return some other countries began to fly in this field such as Singapore, according to greens.
And while both chambers of Parliament in Switzerland voted to reject government aid for the merger deal between the two largest banks in the country, which shocked the government, a poll by the “Sotomo” Research and Consulting Institute recently showed that two-thirds of the population oppose the deal, while a third of the respondents expressed their anger at the use of emergency laws to bypass Parliament, while politics professor Michael Hermann, director of polls at Sotomo, said that the Swiss political model “is under pressure at the present time, adding that the foreign view of Switzerland as a business-friendly environment and a financial safe haven may be undermined.”
For his part, the economist and banker Ali Hamoudi believes that the consequences of the collapse of the “Credit Suisse” bank will be dire for the Swiss banking sector, in addition to that this collapse will certainly benefit competing financial centers, including Luxembourg and Singapore in particular, which have grown rapidly in recent years, noting He pointed out that Switzerland’s credibility as a stable country was shaken by moves such as the decision to write off the value of Credit Suisse bondholders.
“The huge Swiss banking sector has come under pressure over the years after banking secrecy declined as other countries sought to crack down on tax evasion by citizens,” Hammoudi explains.
The financial sector’s contribution to the Swiss economy has also declined, falling to 8.9 percent of Swiss GDP in 2022 from 9.9 percent in 2002 as industries such as pharmaceuticals become more important in a country with the third highest GDP per capita in the world.
Hamoudi points out that “Switzerland’s old banking traditions and structural advantages mean that the country will remain heavily involved in banking in the future as investors continue to choose it because of its stability and the strength of its currency in Swiss francs, but competition is still more fierce and strong because recent events mean that we may see In the end, Singapore overtakes Switzerland as a global banking centre.
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