ALEX BRUMMER: The rush to revive Credit Suisse could be like a red rag to a bull to regulators
The focus of my opinion on the part of Swiss Radio and Television was, to say the least, surprising.
He wanted a British opinion on whether the collapse of Credit Suisse and the subsequent bailout by rival UBS had damaged Switzerland’s reputation as a bulwark of stability in a troubled world.
Switzerland and its bankers have always exuded supreme confidence and were not in the habit of seeking outside opinions. The country has been the home of discreet banking for centuries.
It was a nation where autocrats, billionaires, and financial scoundrels could deposit their funds without concern for the safety or disclosure of their holdings.
Only in the last few decades, under pressure from Nazi money hunters and US tax authorities, has privacy been diluted.
Misleading: UBS profit is an accounting whim. It consists of the difference between the value of Credit Suisse’s assets and the modest price UBS paid for them.
Then this year Credit Suisse imploded, after a crisis of confidence that started in San Francisco spilled over into Europe.
It experienced an extraordinary run on its investment funds after a series of executive mistakes and was taken over by rival UBS.
The quarterly results of the UBS give an idea of the evolution of Swiss banking. At first glance, UBS’s £23bn pre-tax profit report makes it seem like it completed the deal of the century when it bailed out Credit Suisse.
After all, this is the biggest quarterly profit for any global bank since JP Morgan posted £11.4bn in 2021.
The UBS profit is an accounting whim. It consists of the difference between the value of Credit Suisse’s assets and the modest price UBS paid for them. It has little to do with underlying performance.
More important for the future and the reputation of Swiss banking is what happens next. New boss Sergio Ermotti has decided to retain Credit Suisse’s domestic business, allowing his bank to dominate the Swiss banking landscape.
Costs will be reduced and thousands of jobs will be lost in Zurich and across the country. When Lloyds bought HBOS during the great banking crisis, it revived and invested in the Halifax brand. UBS plans to ditch Credit Suisse’s tainted name.
Presumably he fears that his main wealth management arm could be tainted.
However, competition authorities and lawmakers are concerned that the country is at the mercy of a banking monolith that, by definition, will be too big to fail, being the last commercial bank standing.
There is no shortage of smaller Swiss private banks. The idea that one of the world’s most trusted financial centers is at the mercy of a giant, with no significant competition, is more typical of an autocracy than a vibrant democracy.
The 26 regional cantons give Swiss citizens the right to vote on everything from transgender rights to Covid prevention to multinational tax deals.
The UBS has become a colossus of wealth management. However, it is far from the perfect bank. Investment banking was wound up after huge amounts of money were lost in the financial crisis.
Americans have been on his case for the way he protected American citizens from tax scrutiny.
The rush to integrate Credit Suisse can be good for shareholders and executives.
But it could be like a red rag to a bull for regulators who want to keep the illusion of competition alive.
Many companies abandon the stress of quarterly reports, arguing that they encourage short-term thinking, are administratively disruptive, and take up too much executive time.
Klarna, a pioneer in buy now and pay later, has adopted an alternative model.
Group CEO Sebastian Siemiatkowski declares victory over “misconceptions” around the business model. He notes that February 2023 will be “a profitable month” “well ahead of target.”
It’s great that, against the backdrop of a cost of living crisis, Klarna is going against the trend. She reports that the “gross merchandise value” of her trade has risen 14 percent globally.
However, the group’s decision to focus on one month will not necessarily inspire confidence.
Marks & Spencer declares legal war on the Government over its decision to reject its proposal for a new store in Marble Arch, in London’s West End.
Wouldn’t it be better to go back to the drawing board to preserve the existing façade or make the building work better (as Selfridges, the neighbor does) rather than dilute political capital and waste money in the courts?