People in the Swiss financial world used to say that if UBS and Credit Suisse merged, it would be like the sun rising in the west. Not possible. Almost a funny line. After that, on a Sunday night in March 2023, hours before Asian markets opened, Swiss regulators turned that joke into law.
It was moving very quickly. The bank was bought for three billion Swiss francs. Its shares used to be worth more than 82 francs each. 167 years of history were lost over the weekend. Both bank headquarters are very close to each other in Zurich’s Paradeplatz, which is a quiet, almost ceremonial square. It didn’t look any different on Monday morning. But something very important had changed.
What UBS has taken over is overwhelming in its size. Together, the groups are now in charge of assets worth about $5 trillion. It has a balance sheet worth $1.6 trillion, which is about twice the size of the whole Swiss economy. Nobody should be able to sleep at night after seeing that number. It brings up a question that Switzerland has never really had to answer: what happens when a private institution gets so big that the country can’t afford for it to fail?
The merger pretty much breaks a promise to change things that came out of the financial crisis of 2008. It was supposed to be the end of the “too big to fail” rule. The way banks were set up was supposed to keep taxpayers out of the mess when they failed. A professor of banking at INSEAD named Jean Dermine made it clear: that central reform, which took years to build, didn’t work. Switzerland backed up UBS by promising to pay Credit Suisse 9 billion francs if it lost money. Over 100 billion francs in cash were pumped in by the Swiss National Bank. It wasn’t the free market at work here. The government stepped in because it had no other choice.
Credit Suisse’s fall didn’t happen all of a sudden, but it felt that way. The bank took losses from Archegos Capital and Greensill Capital alone that would have shook stronger institutions. In October 2022, rumors on social media caused 111 billion francs to leave its wealth management division in just one quarter. With that much deposit flight, it’s almost impossible to stay alive. When the Swiss government stepped in, there wasn’t much left to save—just enough to stop the fall.
If you look at how UBS has behaved since the acquisition closed in June 2023, you can tell that the bank knows what it’s getting into and that it can’t completely control what will happen. Sergio Ermotti, CEO, said that the next phase will be “bumpy.” That is a careful word. It probably means that 120,000 people will lose their jobs. It’s likely to lead to tough talks about what to do with Credit Suisse’s “crown jewel,” or domestic banking network, which comes with all the political pressure that comes with it.
Concerns about the merger are less public and less loud among wealth management clients, like private individuals and family offices that both banks have long worked with. Risk of concentration. Not as many options. It’s not as hot. The Swiss banking system has a good reputation around the world for being safe and private. Arturo Bris of IMD’s World Competitiveness Center has pointed out that this hurt that reputation in a real way. Investors and clients who chose Switzerland because they thought it would be safe are now questioning that choice.
It’s still not clear if this merger will actually make UBS shareholders money in the long run. Analysts are really not sure what will happen, and the bank itself listed both possible costs and benefits in the tens of billions of dollars, but didn’t say for sure which number was higher. It’s more likely that the merging of Swiss banks has made something too big to handle quietly, too important to regulate lightly, and too new to fully understand. When the people who hold the world’s wealth merge, it doesn’t go away. It just waits under a different roof.
