This month marks a year since Credit Suisse, a once systemically important financial institution, crumbled and threatened global financial stability. The Swiss government initiated a UBS takeover of Credit Suisse, and although the $3.3bn deal had regulator approval, it did not have the backing of UBS shareholders.
UBS a likely Titanic after Credit Suisse acquisition?
The acquisition turned UBS into a colossus with a current market cap of approximately $102.46bn. Based on Reuters information, its balance sheet totals more than $1.6tn, which is roughly double the Swiss economy.
On paper, this financial giant may seem unsinkable, but economists argue that UBS is “too big to save”. The inability of Credit Suisse to stem deposit outflows and maintain its liquidity buffer spotlighted gaps in accessing acceptable capital levels.
As an alternative, experts reportedly requested the Swiss National Bank (SNB) to approve other collateral-based assets such as corporate and security-backed loans. The SNB indicated that it continuously assesses viable collateral and takes considerations up with banks.
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Those in the know expect a report from the Swiss government in April 2024, which may contain more stringent capital regulations for UBS. Sergio Ermotti, UBS’s chief executive officer, indicated that the bank anticipates possible stricter capital rules.
Reuters cited Peter Hahn, an emeritus professor at the London Institute of Banking & Finance, who said:
All domestic and globally systemic important banks have become public-private partnerships. No government can risk their instability.
As one of the world’s largest banks, UBS presents a significant risk to the global economy should it falter.
