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According to Bloomberg, Swiss banking giants, UBS and Credit Suisse, may create a conglomerate this year. The issue of a possible tie-up was raised back in 2020, but the parties failed to come to a final decision.
Last year, UBS came up with the idea of a combined business group. This time, it was Credit Suisse that expressed strong interest in a potential marriage. Earlier, the company lost billions due to the collapse of US hedge funds. The management of Credit Suisse, the second largest financial holding in Switzerland, decided that the best way to cover losses is a corporate merger.
Creating a union with UBS is one of the strategies pursued by Credit Suisse's new chairman Antonio Horta-Osorio, Bloomberg notes. After taking office in late April, he announced his intention to focus on the cleaning that would shrink the Credit Suisse balance sheet and reduce capital allocated to the investment bank, as well as selling a part of the business.
However, a merger between the two giants is likely to face steep regulatory hurdles. First of all, UBS needs to close its Swiss branch. Another difficulty is that the Swiss banking regulator is undergoing a change in its leadership. Experts do not exclude that the new management will not approve the deal. Analysts believe that this merger could upset the balance in the country's investment banking sector and affect European banks.
Notably, Credit Suisse’s financial difficulties stem from the collapse of two hedge funds - Greensill Capital and Archegos Capital. Earlier, the financial conglomerate gave a $140 million loan to Greensill Capital, which later filed for insolvency. As for Archegos Capital, Credit Suisse acted as its broker. In late March 2021, the firm started a fire sale of its assets. As a result, the Swiss conglomerate suffered a $4.7 billion loss from its relationship with the troubled investment firm.
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