Since the CS thread is doomed now, let’s talk about the next big problem : UBS balance sheet sheet is wortht TWO TIMES the swiss GDP !!! It’s even biger than the swiss national bank ! In other words, UBS could buy all of the goods and services producted in the whole country during one year and still have spare left …
I guess the good side is that the probability of a liquidity problem is low thank to that but on the other hand, what could SNB possibly do in that case ? Even if they used every last franc they have right now, it would not be enough to “save” UBS.
So what ? We split the bank in 2-3 parts ? Keller Sutter just brutally forced CS and UBS to marry (and screwing bond holders in the process) so we can’t come now and say “no finally, CS should stay separated, sorry for the trouble” isn’t it ?
Personaly, I think it’s very wrong for a private single bank to have more power (in financial term) than the country…
What do you think ? Is it even possible to still do something about or is it already too late ?
Ok, thats a fun topic. In my view, our To Big to Fail regulations are already 80% there. They just need a slight twist, namely:
Ban of Intra-Group Loans: No Loans from/to Swiss Entity and Holding/Group Companies
Finma Approval for Swiss Entity Dividends: Holding/Group Co‘s only get money out lf SwissCo if Finma approves to do so
SwissCo Bail-In Equity Increase: Obligation for Holding Co to Capital Increase SwissCo if SwissCo falls below pre-defined Equity Levels (subject to sufficient Equity Levels at Holding Co), these do not count against bail-in capital requirements at a SwissCo level
Regulated Shared Platforms / Services: SwissCo may not consume Shared Services from Holding/Group Co UNLESS Service may (at no more than 25% one-off cost and within 6 Months) be sourced at from the Market (Auditor to testify this on an annual basis and Finma to approve these plans); SwissCo may provide (arms length billed) Shared Services to SwissCo PROVIDED SwissCo‘s part of Shares Services (cost thereof) exceeds 75%
Brand Held at SwissCo OR a perpetual, non-biable license granted by HoldingCo to SwissCo
That should do the trick and to be fair, I don‘t think it would be unreasonable. Clearly, that won‘t resolve anti-trust issues but resolution can be fixed. Other than the big OUPS, this would allow UBs to go bust without putting SwissCo at Risk.
If we want to go further, we could add a clause that SwissCo‘s shares shall be listed (albeit not added to Indices given 100% held with UBS and Zero Liquidity) so that in case of Urgency, UBS could simply sell the shares in the open market, without any need to first prepare an IPO or find an investor that buys the shares. But that may be a bit too much?
UBS doesn‘t own all this money per se. The owner of the money is the lender/client or UBS when they lend the money. Also all the money isn‘t just laying around, most of the money is probably invested in assets.
UBS doesn‘t have more power than our country.
The SNB has an unlimited amount of money, they generate/print new money.
What should be done about what in your opinion?
I think the worst aspect of this merger is that UBS will lose it‘s competitor and have too much market power.
Will this mean that they can now undercut their remaining competition and finally offer attractive conditions to their retail clients? Because their current products are rubbish…
But lets face it, you and me are not their target market. Globally they will now move up to the top 20, from rank previously about rank 34 (if the ranking linked below is about right, the top 4 are chinese ):
The market segment they are doing rather well in, is being the super rich people’s private bank. I’m not going to shed a tear for them… The market segment I live in has better offers from Kantonalbank, Raiffeisen, Migros Bank, etc. And let’s not mention their trading account fees.
I guess the hard part in that will be to actually write the law that imposes all that and make it vote in Bern ^^‘’ But I’m glad to see there is something doable
Yeah, I get you but think about it : if almost everyone in the country has an account in only one bank, that mean that bank can see and control the funds of almost everyone… what happen if they decide to double fee ? Some society can’t change bank that easly.
Now, imagine that the bank go tell the federal council “don’t pass that law or I triple the fee tomorrow”, you get what I mean ? It’s not their money ok but it bring them power.
Frankly I’m not sure what the best way is from now on but I agree that the loose of a competitor is bad.
it’s true it’s ridiculous for a private person to have an account at UBS with what they cost Just remember that a loft of sme have an account in CS and now, they will be forced to be customer at UBS. Would Raiffeisen or Migros big enough to offer them the same service CS did ?
I guess many clients will go elsewhere, especially those who have accounts in both banks, in order to have enough baskets for their eggs.
So possibly the new UBS will be, in a few years, as big as the older one.
A personal payment account starts at CHF 5/month.
Just CHF 3, when you’re holding CHF 10’000 assets or more with the bank.
And you can even get a free credit card from them along with that.
Not free - but not ridiculously expensive either.
And it’s a very good bank.
Admittedly, I don’t know the needs of SMEs but I would expect a set of accounts, potentially including several currencies if they deal with import/export, a line of credit, maybe some more specific credits and a few corporate credit cards at most. I don’t see what is so complicated with that that a Raiffeisen, cantonal bank or Postfinance couldn’t offer the required setup and get it working under a few weeks.
Banks usually lobby the parliament rather than blackmail the federal council to get what they want, I would expect backlash in the form of legal trouble and customers leaving the bank if it became public knowledge that they did actually try to use blackmail at the highest levels. Other regulators elsewhere in the world would probably not stay iddle either and apply “subtle” pressure over the activities of the bank in their respective markets if something of such scale happened. Also, fees blackmail can be dealt with with some special helping facilities for the companies exposed to those fees, ala what has been done during Covid, to support them for the time required for them to change their banking relationships. As we have seen here, swiss regulators could exert pressure on other banks to accept those clients and cater to their needs.
For the swiss retail/SMEs business, I would expect Raiffeisens, Postfinance and cantonal banks to be big enough to compete and offer the full set of expected services.
For the previous investment banking activities of CS, I would expect the closest thing to that in Switzerland is now done by the ZKB.
Regarding wealth management, I expect wealthy customers to have the means to pay for lawyers/financial advisors that will cater to their interests and find the best financial setup for them aside from UBS if UBS isn’t the best one for them.
That to say that I am not too overly worried about the situation. My biggest worry would be that we have created a yet bigger too big to fail entity that may spark a new economic crisis if they leave their conservative business model and focus on riskier but more lucrative over the short term activities. I have no doubt the SNB can grow its balance sheet to whatever size needed to intervene in whatever way is deemed necessary if that happens, the most problematic part with that being the backlash in the press and general public from people expecting, I would say wrongly, that the SNB balance sheet and/or profits/losses behave like any other bank/institution.
It’s funny I am starting to see online ads for ZKB.
I bet they are trying to attract new client from CS/UBS during this dark time.
It may rebalance a bit.
As far as I can tell, UBS doesn’t offer free credit cards outside their banking packages.
The regular price of their main banking package is CHF 13. Or CHF 8 if you hold at least 10k at UBS or have a mortgage. This includes a debit and a credit card. Still not ridiculously expensive but also not particularly cheap (ignoring discounts for young people).
If you don’t hold at least 10k at UBS, you can alternatively get their newer key4 banking package, which also costs CHF 8 but only includes a debit and a prepaid card, no credit card.
Thanks for the correction. I forgot about the basic card as it’s not listed in their ‘Services and prices’ PDF, which seems to cover everything else, if they don’t have additional hidden offers.
thanks for the answer ! I guess the “smaller” bank can upgrade their service where there is demand. In fact, my boss already talking about switching to cantonal bank since he has (had) a CS account for the society.
True, any evidence of blackmail would backfire on them and it can always be the other way around too if needed (I guess)… I would not rely to much on federal fund to help sme in diffuclty though as I saw some who were forgotten during covid crisis. Exemple : one who started the activity the same year obviously cant no produce turnover of 2 years : no help ! I know one such exemple who had to close door exactly because of that.
And yeah, wealthy customers can change banking relationship without too much problem but will they choose to stay in Switzerland ? Maybe they’ll prefer UK or Singapour…
About : SNB it can indeed print as much money as needed BUT, we don’t want it to become like the US Fed and devalue the franc like the dollars isn’t it ?
Does anyone more knowledgeable than me understand what would happen if there was a run on deposits at UBS like there was at CS? Would SNB be forced to print CHF to save Swiss citizens’ deposits - would they have to print so many CHF it would crash the currency and our entire economy?
p.s. for people who don’t understand banks - which includes not only me but I start to realise also certain major shareholders, bond holders and bank management - here is a thought provoking article. Taking the example of Natwest bank: if 10% of loans go bad the whole of shareholder’s equity is wiped out
I probably have shared that before…
A few years ago. visited my nearest UBS branch in normal, middle-class town Switzerland, to ask about opening a bank account.
A tall gentleman in a suit happened to run the front desk that day and greeted me upon coming in. Now, everyone at UBS is rather well-dressed in what’s essentially a high-street locale selling products to the broad public. Whether this was his normal post at the branch, I’d never know. It certainly was around lunch time, where I’d expect they don’t make appointments and shuffle around their personnel a bit. The guy did exude a whiff of seniority and seemed a tad too sharply dressed to just fix you an appointment at the front door. More like someone who will receive you for your scheduled appointment in a back room and explain you how to invest your hundreds of thousands or first one or two millions.
Anyway, I asked him about bank account, a stand alone bank account at that. He looked down at me, declared „we only do packages“, handed me a brochure detailing their account packages and merrily sent me my way out (I didn’t insist or confronted him with the offerings I had seen on their website).
A few days later, I happened to be near another branch in a known downmarket area. More down to earth staff as well. No problem in opening a stand-alone account.
They still were caught off-guard and „not sure we’re offering that product anymore“, when I asked for the Basic credit card. But their friendly apprentice clarified internally, got back to me the next day and a fee days later I got that card. Which worked as advertised and was integrated in the same online banking.
They really don‘t seem keen to sell their cheaper stand-alone products.
Do you understand how runs work? If people get so confused/panicked that they do run on perfectly healthy banks, then yeah they might crash the economy and beyond (because I don’t think central banks can do anything about such levels of panics though). (but then I’d guess the population brought it on themselves)
And no, central banks don’t “print money” (at least not in a way most people understand it) to backstop a bank run (especially of a healthy bank). In that case they’d probably attempt creating a new bank from scratch to hold the targeted bank assets that need to be unwind (with the hope that people would trust the new bank). (but honestly if we reach that level there’s nothing rational anymore, and I’d say buy gold and a gun instead).
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Just remember that a loft of sme have an account in CS and now, they will be forced to be customer at UBS. Would Raiffeisen or Migros big enough to offer them the same service CS did ?