Banks: merger with UBS to save Credit Suisse
After the massive loss of confidence in Credit Suisse, rival Swiss bank UBS wants to take over its stricken competitor. The largest bank merger in Europe since the financial crisis of 2008 is to be backed by the Swiss National Bank with up to 100 billion Swiss francs (about 101 billion euros). Is the merger a sensible step or will it create an unwieldy monster?
The right reflexes this time
ABC seas a learning effect here:
“The sale of Credit Suisse marks a new record in the race in which central banks and governments on both sides of the Atlantic have scrambled to complete this operation in recent days. The experience of the 2008 disaster has prompted both sides to act swiftly to contain a spiral of contagion and prevent a major loss of confidence among investors. They have displayed reflexes that were lacking fifteen years ago and activated an early warning while at the same time reassuring the markets with a series of credible messages and concrete actions.”
Threat of creating a fragile monster
Handelsblatt fears that the merger will exacerbate the problem:
“A strong big bank can take over weak small banks and restructure or wind them up. But when two weighty financial institutions merge, one stable and one fragile, then — as we have seen time and again — the risk is very high that what remains is a fragile monster. ... In the Swiss case, there is also the fact that each of these banks on their own — UBS and Credit Suisse — are already too wieldy for relatively small Switzerland, which makes it difficult for the government and the central bank to provide credible support. Against this background, a mega-merger is anything but a good idea.”
There was another option
The Neue Zürcher Zeitung posits that a takeover by the state might have been the better solution:
“Switzerland has now rid itself of a zombie bank, but it will wake up on Monday with a monster UBS bank. ‘Monster’ because its new balance sheet total will be almost twice as large as Switzerland’s economic output. ... The takeover of CS by UBS would most likely not have been the only option. ... The state itself could have put in an offer for the bank, also at a fraction of the share price. ... It could then have privatised the bank or parts of it as soon as possible, which would have prevented UBS from turning into a giant.”
