UBS can continue to benefit from her heritage and expertise, said the UBS Chairman.
(Photo: Reuters)
Basel After the emergency takeover of Credit Suisse, the UBS management dampened expectations of a spin-off of the former competitor’s local business. Lukas Gähwiler, Vice President of UBS, responded to corresponding demands from shareholders at the UBS General Meeting: “A spin-off could be difficult and financially less attractive than commonly assumed.”
He referred to the complex IT architecture, the high need for refinancing and the lack of international connections. One must therefore remain realistic as far as the prospects for a spin-off are concerned. “One thing is certain: the Credit Suisse brand will remain in Switzerland for the foreseeable future.”
However, he can understand that many employees are concerned about their future. However, according to Gähwiler, it is far too early to speculate about possible job cuts. He also countered competition law concerns: “There is enough competition in Switzerland with around 250 banks.”
Vincent Kaufmann, head of the Ethos Foundation, which represents Credit Suisse and UBS shareholders, had previously renewed his call for Credit Suisse to be spun off. “We are concerned about the new banking giant.” The proceeds of a spin-off could be distributed to UBS shareholders as a special dividend.
Analysts had estimated the value of Credit Suisse Switzerland at eight to ten billion francs. Another shareholder therefore called the purchase price of CHF 3.25 billion for the entire bank a “humiliation”. Recently, Swiss politicians have also called for the local banking business of Credit Suisse to be spun off.
However, UBS President Colm Kelleher made it clear: “From now on, Credit Suisse will no longer be an independent company.” The chief supervisor swore the shareholders to a long phase of transition.
Financial supervision demands more power
He predicted that the integration of the two businesses would take three to four years. A situation had arisen that nobody wanted, according to Kelleher. “At the same time, this also means a new beginning for the combined bank and the entire Swiss financial center.”
In mid-March, the Swiss government orchestrated an emergency takeover of Credit Suisse by rival UBS after a bank run brought the 167-year-old institution to the brink of insolvency.
In order to be able to prevent similar emergencies in the future, the Swiss Financial Market Authority (Finma) requires additional competencies. Among other things, the authority wants to be able to impose penalties like other important supervisory authorities can, said FINMA Board President Marlene Amstad on Wednesday.
In extreme cases, Finma instruments reach their limits
“Finma does not have the power to impose penalties – it is therefore an exception compared to other large financial centers.” The events surrounding Credit Suisse have shown that the authority’s instruments reach their limits in extreme cases. Therefore, an expansion should be considered.
A senior manager regime should also be discussed – i.e. the mandatory assignment of individual responsibilities to management bodies. “This can also strengthen an institution’s corporate culture, which is closely linked to a clear assignment of responsibility and a healthy tolerance for risk,” explained Amstad.
According to Amstad, it would also be desirable for Finma to be able to provide information about so-called enforcement procedures, which the regulator uses to sanction banks in cases of mismanagement. At present, most of the authority’s investigations into banks must remain secret, also in order not to further destabilize banks.
“From Finma’s point of view, the two instruments fine and senior manager regime as well as the possibility of more active communication of completed enforcement proceedings would supplement and complement its overall functioning toolbox,” said the head of the board of directors.
With material from Reuters.
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