Banks failing: Lessons learnt from the Credit Suisse collapse - Part 1

 

"The bank merger and its implications

Although it is too early to judge the full impact of this deal; we can, however, state the following:

1. Credit Suisse is a TBTF bank, the second-largest Swiss bank and employs 50,000 workers around the globe and 17,000 in Switzerland. UBS’s acquisition comes with the aim of shrinking Credit Suisse’s core business (investment banking), or in the words of UBS Chairman Colm Kelleher: “(…) UBS intends to downsize Credit Suisse’s investment banking business and align it with our conservative risk culture”.
2. UBS will be able to reinforce its position in investment banking. The takeover will allow UBS to target the Asian and American market while becoming “the world’s leading wealth manager with $5 trillion of invested assets”, according to CNN."

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Bailouts, mergers, what next?

The Credit Suisse collapse occurred because the alarm bells failed to ring properly. There is the feeling that FINMA’s detection of the problem was too little too late. Also, the fact that it is ultimately the SNB that is left to deal with the dirty laundry when the horse has already bolted, raises the question of the role of the Swiss watchdog and its firepower in preventing similar situations.

This is more alarming if we consider that the bank acquiring Credit Suisse is a bank that was bailed out by the taxpayers and the SNB just a few years ago following the 2008 financial crisis in similar circumstances. Adding pressure is the fact that the merger of two of the largest Swiss banks will now create one gargantuan bank, and if red flags fail to signal problems again, the room for maneuver will be very tight indeed"

SOURCE:

https://hospitalityinsights.ehl.edu/banks-failing-lessons-learnt-credit-suisse-collapse-part-1