“Jointly with the company Swiss Stablecoin AG, the Swiss banks are launching a secure digital live environment, a so-called sandbox, to explore ways to connect blockchain applications with the Swiss franc,” UBS said.

UBS, PostFinance, Sygnum, Raiffeisen, ZKB and BCV are part of the initiative, and places have been kept open for other participants as well.

“Right now, there is no regulated Swiss franc-pegged stablecoin with broad application in Switzerland. The sandbox will be conducted in 2026 and aims to strengthen the Swiss digital money ecosystem,” UBS added.

Lenders all over the world are seeing stablecoins (cryptocurrency designed to maintain a constant value and backed by traditional currencies) as their potential competitors, thereby putting the industry under pressure to explore and embed the usage of ‌blockchain ⁠technology within their businesses.

While several banks have experimented with stablecoins, a new direction was provided in 2025 when United States President Donald Trump signed a law establishing regulatory guidelines for stablecoins under the GENIUS Act (Guaranteeing Essential National Infrastructure in US-Stablecoins). In December 2024, the European Union’s Markets in Crypto-Assets Regulation (MiCA) came into effect, followed by Hong Kong’s Stablecoin Ordinance.

Switzerland is not the only European country to launch a stablecoin sandbox. Another group of 10 European banks, including ING, UniCredit and BNP ⁠Paribas, in 2025, formed a company to launch a euro-pegged stablecoin in the second half of 2026, to counter Uncle Sam’s dominance in digital payments.

Another separate consortium of 10 banks, including Bank of America, Deutsche Bank, Goldman Sachs and UBS, is exploring issuing a stablecoin. While the particular cryptocurrency has witnessed a sharp usage spike in recent years, the market is still dominated by the El Salvador-based company Tether, and demand for the few bank-issued stablecoins has so far been limited.

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The developer has a land bank of 2.3 million square metres across Saadiyat Island (plots will house large-format villas and mansions) and Yas Island, according to a statement to the Abu Dhabi Securities Exchange (ADX).

The Yas Island plots, on the other hand, will be allocated to large-scale, master-planned family living communities supported by established retail, entertainment and lifestyle infrastructure, and the projects will be launched in a phased manner from 2026, in line with market demand, by a joint venture with an established partner to activate the land plots.

In an investor presentation in November 2025, Aldar Properties announced that its land bank in Abu Dhabi consists of a gross floor area (GFA) totalling 7.8 million square metres and a total land bank of 59.9 million square metres. The company’s revenue backlog in the UAE stands at AED 57.3 billion, with approximately AED 36–37 billion generated from Abu Dhabi.

The presentation also highlighted two major residential master plans in Abu Dhabi: Fahid Island, which has a gross development value (GDV) of AED 40 billion (approximately USD 11 billion), and a strategic development on Saadiyat Island, in joint venture with Mubadala, with a GDV of about USD 1.1 billion.

The news of Aldar Properties expanding its housing portfolio also comes at a good time, as Skyscanner’s “Travel Trends Report” sees the UAE likely emerging as one of the most popular destinations for international travellers in 2026, with Dubai, Abu Dhabi, and Sharjah being the most desired destinations.

The increase will be primarily due to holidaymakers seeking hotel experiences, and Dubai is leading the way in advance hotel bookings with a 89.7% increase in bookings over 2024.

“Germany, Switzerland, Canada, and South Korea are looking for destinations with comfort, culture, and unique experiences, and Sharjah has seen 101% more searches from German tourists attracted by its heritage sites and beaches, as well as low-cost flights, while Switzerland has seen a 99% increase in searches,” the report stated.

The post Aldar Properties to build 3,000 new homes in Abu Dhabi appeared first on International Finance.

Among them are the six grandchildren of the late business tycoon Goh Cheng Liang, founder of Wuthelam Holdings, which manufactures paint and coatings. Liang died in Singapore in August, aged 98. Each grandchild inherited stakes in a public company worth more than USD 1 billion. On the other hand, 196 “self-made” business leaders became billionaires this year, with a collective wealth of USD 386.5 billion, UBS said.

“These heirs are proof of a multi-year wealth transfer that’s intensifying,” UBS executive Benjamin Cavalli told Reuters.

The study was conducted on the basis of UBS’ tally of super-rich clients and a database that tracks the wealth of billionaires across 47 markets across the world.

As per the bank’s calculations, at least USD 5.9 trillion will be inherited by billionaire children over the next 15 years. Most of this inheritance growth will take place in the United States, with India, France, Germany, and Switzerland next on the list.

“However, billionaires are highly mobile, especially younger ones, which could change that picture. The search for a better quality of life, geopolitical concerns, and tax considerations are driving decisions to relocate,” the UBS study added.

In Switzerland, where USD 206 billion will be inherited over the next 15 years according to the bank, voters recently overwhelmingly rejected a proposed 50% tax on inherited fortunes of USD 62 million or more, with critics predicting that the move could trigger an exodus of wealthy people. Not only Switzerland, but Europe in general is facing calls to introduce a wealth tax on the international elite. However, voices against such policy moves are making their points loud and clear as well.

“Switzerland, the UAE, the United States, and Singapore are among the billionaires’ preferred destinations,” UBS’s Cavalli noted.

In October 2025, the French parliament voted against a proposed 2% tax on fortunes over 100 million euros. Italy, which has attracted many wealthy residents thanks to its flat-tax regime for foreign income, has set out plans to increase the levy by 50% to 300,000 euros a year from 2026.

The United Kingdom, which distanced itself from reports of implementing a formal wealth tax, officially ended non-domicile status in 2025. Under the previous arrangement, British residents who declared their permanent home as overseas could avoid paying tax on foreign income and gains. The Keir Starmer government has also announced plans for a council tax surcharge, labelled a “mansion tax,” on homes worth more than 2 million, as Chancellor Rachel Reeves introduced her second budget in November.

In 2024, Spain, Brazil, Germany, and South Africa signed a motion at the G20 for a minimum 2% tax on the super-rich to reduce inequality and raise public funds. As per a study by the leading French economist Gabriel Zucman, the move could net up to USD 250 billion in extra revenue.

The post Billionaires inheriting record levels of wealth: UBS report appeared first on International Finance.

Additionally, he had important meetings with Volvo Group and Yara Clean Ammonia to talk about possible collaborations.

The economic agreement improves bilateral ties, especially in trade, investment, and economic growth, signed by Switzerland’s State Secretary for Economic Affairs Helene Budliger Artieda and Egypt’s Minister of Planning and Economic Development and International Cooperation Rania Al-Mashat.

“The signing of the Joint Economic Committee agreement strengthens bilateral relations between Egypt and Switzerland in various fields, particularly trade, investment, and economic development,” Mostafa Madbouly stated.

He underlined that the agreement is a major turning point in Egyptian-Swiss collaboration and a bold move toward deepening economic ties in keeping with both nations’ goals of sustainable development in several areas.

The agreement creates a Joint Economic Committee to support investments, encourage bilateral trade, uncover market opportunities, ease information sharing, and remove trade obstacles.

In addition, the committee will encourage the sharing of expertise and examine current economic accords. According to Minister Al-Mashat, the current bilateral cooperation portfolio consists of USD 71.6 million in grants that support nine projects in the public, private, non-profit, and government sectors.

Yara Clean Ammonia CEO Hans Olav Raen met with Mostafa Madbouly, who commended the continued collaboration in green hydrogen. Considering Egypt’s emphasis on expanding its renewable energy capacity for the production of green hydrogen, he stated his desire to deepen cooperative efforts.

Additionally, he emphasised Egypt’s intention to raise the proportion of renewable energy sources in the mix.

Drawing attention to President El-Sisi’s recent visit to Norway and the following agreements, Raen reaffirmed Yara’s dedication to a long-term partnership.

He said that he would like to travel to Egypt to talk about extending collaboration in the production of green hydrogen and ammonia. Representatives from Yara also indicated interest in working together on producing fertiliser and urea.

The post Egypt, Switzerland sign economic agreement in WEF 2025 appeared first on International Finance.

The Swiss tax system operates on three levels: federal, cantonal, and local. Switzerland’s 26 cantons set tax rates, creating competition to attract businesses and residents. Federal tax revenue comes mainly from corporate income, individual income, and value-added tax (VAT). Cantonal and municipal layers of taxation significantly impact the overall tax burden. Wealthy individuals and corporations can benefit by choosing cantons with favourable rates.

Individual tax rates in Switzerland are relatively low compared to many countries, especially for high earners. The tax burden includes federal, cantonal, and local contributions, varying based on where one lives. Federal income tax is progressive, with a top rate of 11.5%. When combined with cantonal taxes, total income tax ranges from 20% to 45%, depending on the canton.

Wealth tax, rare in other countries, is common here. It applies to worldwide assets, such as property, investments, and savings, and is determined by cantonal and municipal authorities. There is no federal capital gains tax except for property in some cases, and inheritance and gift taxes are also managed at the cantonal level. Most cantons exempt direct descendants, making Switzerland appealing for wealthy families to pass on assets.

Corporate taxes and lumpsum taxation

Corporate tax rates in Switzerland are highly competitive, offering numerous advantages for multinational companies. Corporate taxes are levied at the federal, cantonal, and local levels. The federal rate is a flat 8.5%, and when combined with local taxes, the effective rate ranges from 11% to 21%, much lower than in many other European countries.

Swiss tax regulations provide significant benefits to holding companies, which in some cantons are exempt from cantonal taxes altogether. Companies can negotiate tax rulings with cantonal authorities to gain certainty on their tax liabilities before making significant investments. Switzerland’s extensive network of tax treaties also helps avoid double taxation, making it an attractive base for international businesses.

Switzerland also offers lumpsum taxation (forfait fiscal) for wealthy individuals who move to the country but do not work there. Under this scheme, taxes are based on expenses, often calculated as a multiple of the rental value of their property, rather than on global income. This option appeals to retirees, celebrities, and the ultra-wealthy who want to live in Switzerland while benefiting from relatively low taxes. Although some cantons have abolished this scheme, it remains attractive in others.

In response to global pressure, Switzerland has adjusted its corporate tax policies. The OECD and G20 have pushed for a minimum corporate tax rate of 15% for large multinationals. Switzerland plans to comply by amending its constitution, though the new rule will only affect the largest corporations.

Cantons will introduce supplementary taxes to meet these requirements. Despite these changes, most businesses in Switzerland will remain unaffected, and the country will retain its competitive edge.

Switzerland has many tax treaties with other countries, especially with the European Union (EU) and the United States, aimed at reducing double taxation and facilitating cross-border business. It is also a signatory to the Foreign Account Tax Compliance Act (FATCA) and the Automatic Exchange of Information (AEOI), reflecting its commitment to transparency. These agreements have reduced privacy for account holders but have helped maintain Switzerland’s status as a credible financial centre.

Cantonal competition remains key to Switzerland’s tax system. Each canton sets its tax rates, leading to significant variation. Cantons like Zug, Schwyz, and Nidwalden have low rates that attract corporations and wealthy individuals. Zug, often called “Crypto Valley,” draws blockchain companies with its favourable tax policies and business-friendly environment.

Privacy, VAT, and political stability

Banking secrecy has been a major attraction for the wealthy in Switzerland. Swiss banks were famous for strict confidentiality, backed by the Banking Law of 1934, which made it illegal to disclose client information.

However, after the 2008 financial crisis, Switzerland faced international pressure and signed agreements like FATCA, effectively ending its banking secrecy. Banks must now share account information with tax authorities, reducing Switzerland’s appeal as a haven for undisclosed wealth.

This secrecy also attracted criminal elements. During World War II, Swiss banks held assets for members of the Nazi regime, allowing them to discreetly store wealth. This association with illicit funds continued into the 20th century, as organised crime and corrupt individuals used Swiss accounts to hide money.

Notable corrupt politicians accused of holding Swiss accounts include Ferdinand Marcos of the Philippines, Sani Abacha of Nigeria, and Mobutu Sese Seko of Zaire. Strict secrecy laws made Switzerland a haven not only for the wealthy but also for those wanting to evade the law.

Swiss VAT is low compared to other European nations. The standard rate is 7.7%, with reduced rates for essentials like food and medicine. This low VAT helps attract consumers and businesses. Switzerland’s political stability and neutrality also make it appealing as a haven for wealth.

The country’s regulatory environment is predictable, which benefits long-term financial planning. Its well-developed wealth management sector offers expertise for those looking to secure and grow their assets. Favourable tax laws, combined with political and economic stability, make Switzerland one of the world’s leading wealth management hubs.

Challenges and future prospects

The OECD’s Base Erosion and Profit Shifting (BEPS) framework and the global minimum tax rate have forced Switzerland to adapt. Some cantons have abolished lumpsum taxes for the wealthy, and public sentiment is shifting towards fairness. Switzerland has reformed its tax policies to align with global standards while trying to stay competitive.

At the same time, Switzerland explores loopholes and strategies to bypass these regulations. Cantonal tax incentives are often structured in creative ways to ensure benefits for corporations while formally complying with international rules. Such tactics include negotiating special tax deals or exploiting legal ambiguities to minimise the impact of stricter tax rules, thus retaining its appeal to multinationals.

Switzerland remains a prominent financial hub, but its status as a tax haven is less certain as international standards change, focusing more on fairness and transparency. Furthermore, Switzerland faces stiff competition from other tax havens like Singapore, Luxembourg, and the Cayman Islands. Singapore offers competitive rates, with a top marginal personal income tax rate of 22% and a corporate rate of 17%, along with strong financial infrastructure and confidentiality.

Luxembourg, known for its flexible tax regime, has a corporate income tax rate of 15% to 24.94% and is ranked 6th in the Financial Secrecy Index of 2022. The Cayman Islands, with zero corporate tax and no direct taxes on individuals, ranked third on the index and continues to attract significant capital. The United States came first, mainly due to its vast financial services industry and secrecy laws that allow for substantial anonymity. Switzerland ranked second, facing intense competition from other jurisdictions. These countries offer secrecy and low tax rates, making them attractive alternatives for businesses and high-net-worth individuals.

The post Switzerland: A tax haven for the ultra-wealthy appeared first on International Finance.

Additionally, the wealth management division of the company revealed that net new assets for the first quarter of the year were USD 27 billion, up from USD 22 billion for the three months previous.

However, UBS warned that the bank’s wealth management division may be impacted by decreased lending and deposit volumes as well as decreased interest rates in Switzerland.

“In the second quarter of 2024, we expect a low-to-mid single-digit decline in net interest income in Global Wealth Management,” the bank said in a statement, as reported by the Reuters.

UBS’s CEO also said the majority of job cuts in its home market, Switzerland, will start from around the end of 2024 and continue into 2025 and 2026.

In a call with journalists, Sergio Ermotti said the cuts are not something the bank sees as “imminent” and that in the next months it will need “more resources to really manage the very complex integration process.”

In August 2023, UBS said it would axe 3,000 jobs in Switzerland alone after swallowing up its stricken rival Credit Suisse, a move expected to help the bank make significant cost savings.

Additionally, UBS reported that it had saved USD 1 billion in gross cost savings in the first quarter, bringing its total savings since the merger to USD 5 billion. It hopes to have saved an additional USD 1.05 billion, by the end of the year.

Switzerland’s biggest bank reported net income attributable to shareholders of USD 1.8 billion, above a consensus estimate of USD 602 million provided by the company and a USD 1 billion profit in the same period last year.

The first merger of two globally significant banks was completed in June of last year. The merger was arranged by Swiss authorities who were concerned that scandal-plagued Credit Suisse was about to fail. UBS reported losses for two straight quarters, as a result of the costs associated with acquiring its competitor.

Investors are optimistic about UBS’s prospects despite the shotgun nature of the takeover, considering the low acquisition costs and significant asset increase. The bank’s shares have increased by about 40%, over the previous year.

It is anticipated that this year will be crucial for UBS as it takes on some of the more challenging phases of integration, like merging disparate IT systems and legal entities and transferring clients from Credit Suisse to UBS.

Regulators are concerned because, in the event that the bank encounters difficulties, UBS’s balance sheet has grown to almost USD 1.6 trillion, almost twice the size of Switzerland’s GDP, as a result of the merger.

The post UBS marks first profit since Credit Suisse takeover, to go ahead with proposed job cuts appeared first on International Finance.

The acquisition took place on 19th March 2023, through an all-stock deal brokered by the government of Switzerland and the Swiss Financial Market Supervisory Authority. Credit Suisse, the then global banking major, got involved in a series of scandals, leading to market panic. Credit Suisse also saw its share price plunging after the leading shareholder, Saudi National Bank ruled out further investment into the bank due to regulatory issues.

The merger deal was rapidly agreed upon and implemented to prevent turmoil in the global financial markets. As the merger is about to complete one year, International Finance will evaluate the acquisition, and consider whether it has been a profitable endeavour.

Context, acquisition and challenges

Given the fact that Credit Suisse was in deep crisis and the timing of the merger deal also coincided with the closing down of three prominent American financial institutions (First Republic Bank, Signature Bank and Silicon Valley Bank), the marriage between the rivals saved the stock markets from utter chaos.

The acquisition of Credit Suisse by UBS had several strategic objectives. The first was to achieve synergies by streamlining operations, eliminating redundancies, and maximising resources to improve efficiency and cost-effectiveness. Additionally, it aimed to bolster market position and competitiveness by expanding the range of products and services offered, increasing the client base, and extending the geographic reach of the combined entity.

The acquisition aimed to mitigate risks and capitalise on growth opportunities in a highly competitive and volatile market. Ultimately, the goal was to create a stronger and more resilient banking conglomerate capable of navigating global financial challenges and seizing opportunities.

The process of merging two large financial institutions has been a complex and intricate undertaking filled with difficulties. Both entities had their own unique organisational cultures, business models, and operational structures, making it crucial to align and harmonise these aspects.

Minor bumps on the cost front

As of February 2024, UBS has announced its plan to restart share buybacks and find $3 billion more in cost savings from integrating Credit Suisse, as the bank now outlines the next phase of absorbing its fallen rival.

UBS now expects $13 billion in cost savings by the 2026 end, with half of it coming from slashing staff headcount. They had previously set a cost savings goal of over $10 billion. It is also worth remembering that since taking over Credit Suisse, UBS’ share price has jumped some 50%.

The bank has already completed the first phase of the Credit Suisse staff and other resources’ integration, but trickier stages will come now, in the form of thousands of job losses and the combination of different IT systems. UBS CEO Sergio Ermotti has already informed the media that the progress over the next three years would not be “measured in a straight line”.

However, UBS reported a net loss of $785 million for the June-to-September 2023 quarter, driven by costs tied to the Credit Suisse rescue deal, which came in at $2 billion.

UBS now predicts that the expenses will decrease in the coming months as the integration stages progress. However, the fact remains that when the merger happened, Credit Suisse was financially in a bad shape and now this legacy has fallen upon UBS.

Despite the third-quarter loss, shares in UBS gained 4% in Zurich, as the banking group went through a strong inflow of funds, a phenomenon which displayed high confidence from the clients.

“UBS saw $22 billion of net new money flow into its global wealth management business, as it gained new clients and won back assets from those who had pulled funds immediately before and after the emergency takeover. That figure includes flows into Credit Suisse’s wealth management unit, which turned positive for the first time in 18 months,” stated CNN, while mentioning about UBS attracting net new deposits of $33 billion, with two-thirds of the amount coming from legacy Credit Suisse clients.

Tactical staff downsizing

Any merger and acquisition activity comes with staff restructuring, along with the demon called ‘job losses’. As per the reports, UBS has intensified its efforts to reduce costs and increase earnings by aggressively cutting thousands of jobs.

The Swiss Bank aims to save $13 billion by 2026 by cutting gross costs. In August 2023, it announced plans to cut at least 3,000 jobs in Switzerland.

As of February 2024, the headcount at the merged group has been reduced to 112,842 employees at the end of 2023, down from 120,000 post the merger.

UBS has managed to reduce costs by $4 billion, partly through layoffs, and the process accounts for nearly one-third of the venture’s current targeted amount. In the 2023-24 fourth quarters alone, the company cut more than 3,100 positions, bringing its total headcount to fewer than 113,000.

UBS CFO Todd Tuckner has revealed that a significant portion of the latest round of job cuts consisted of staff who were formerly employed in Credit Suisse’s investment bank. These layoffs mostly occurred in the United States and the United Kingdom, with staffers from other parts of the world feeling the pinch too.

For the October-to-December 2023 quarter, UBS recorded a net loss of $279 million, marking its second consecutive quarterly loss, partially attributed to expenses related to the acquisition deal.

UBS’s team of managing directors now possesses 177 individuals. Only around 30 of them reportedly are from Credit Suisse. The number of people promoted to the managing director rank in UBS is now on a downward trajectory. In 2021, it was 208, followed by 183 the following year.

UBS’ effort to make its organisation leaner also coincides with weak customer demand and China’s economic slowdown. Relationship managers were among the posts that faced the elimination heat in Singapore and Hong Kong. These teams were purchased from Credit Suisse during the March 2023 merger.

Singapore and Hong Kong, which traditionally hosted China’s ultra-wealthy, saw UBS fighting low consumer demand and activity levels in 2023. The region’s profit before tax for the wealth management division decreased by 9% in the second quarter compared to the same period in 2022.

China’s rebound from COVID has entered into a stall, with the real estate crisis taking a toll on its economy further. China saw one of its weakest GDP expansion rates in decades (3% in 2022).

Other important metrics

In February 2024, UBS announced a big payout to shareholders. However, CEO Ermotti warned about his venture facing a substantial restructuring before reaping the benefits from its Credit Suisse takeover.

“The year 2023 was a defining year in UBS’s history with the acquisition of Credit Suisse. Thanks to the exceptional efforts of all of our colleagues, we stabilised the franchise and have made tremendous progress in the integration,” these were Ermotti’s statement in UBS’ earnings call, a confident one despite the bank reporting a net loss of $279 million in the final three months of 2023. There was a silver lining in this figure as it was less than the nearly $500 million forecast by analysts.

For the full year, UBS bagged a net profit of $29 billion in 2023. Ermotti also highlighted clients entrusting the bank’s global wealth management division with $77 billion in new assets since the Credit Suisse acquisition.

UBS suspended share repurchases after the acquisition and now plans to reinstate them in the coming months, with the plan to buy back up to $ 1 billion worth by the 2024 end. The venture will raise the dividend it pays to its shareholders to $0.70 per share for 2023, up from the 2023 tally of $0.55.

Still, Ermotti, while interacting with the analysts, preferred to express caution, as he said, “We need to deeply restructure. Our plan is not relying on overly optimistic assumptions about market activity.”

After the merger with Credit Suisse, UBS was able to save $4 billion in cost savings in 2023 and it has raised the target to $13 billion by 2026. However, according to the venture’s chief financial officer, Todd Tuckner, expenses are expected to remain high in 2024 as two-thirds of the integration costs are anticipated to be incurred this year.

UBS had the option of getting Credit Suisse listed separately across the stock markets. Nevertheless, it decided to fully absorb its former rival. Then it identified the problem area, which was Credit Suisse’s investment bank, as the division was at the centre of scandals and crises that brought the venture’s demise.

As per senior equity analyst Andreas Venditti, UBS has done a tremendous job with the Credit Suisse takeover as the business saw a strong increase in dividends, resumption of share buy-backs and higher cost savings target. However, he still believes that the financial institution needs to do a lot more to keep the momentum going.

Wealth management aspirations

With the Credit Suisse takeover, UBS got an unprecedented 25% of the deal-making fee pool in Switzerland in 2023, which helped the venture bring in $251 million in domestic investment banking fees which translates into a 24.9% market share. Bank of America came in second with $91 million in deal-making revenue (a 9.1% share).

The Swiss investment banking market has long been dominated by Credit Suisse and UBS, with Switzerland firmly establishing its ability to fend off the prominence of Wall Street banks in its domestic market.

As financial platform Dealogic decoded UBS’ deal-making successes last year, it found out that Credit Suisse’s revenues were added to these figures, suggesting the size of the Swiss market UBS will defend the merger. In 2022, Credit Suisse brought in 15.1% of the Swiss deal-making fee pool, while UBS grabbed 9%.

UBS’s 25% of the Swiss fee pool in 2023 was the venture’s biggest proportion on record as it bettered Credit Suisse’s 23.5% market share in 2014. In fact in the category of dealmaking, UBS has become a European giant post the Credit Suisse merger, as in terms of market share, only Spain-based Santander comes in the second position with 12% of the domestic investment banking fee pool.

Talking about the 2024 aspirations, UBS has set its eyes firmly on markets like the United States and Asia. The venture aims to achieve at least $5 trillion in invested assets across the world by 2028, a vision which was laid out during the presentation of the financial giant’s 2023 results. To realise the goal, the company will be required to add a minimum of $1.15 trillion from its current $3.85 trillion in invested assets.

The Swiss banking major aims to achieve $100 billion in net new assets (NNA) per annum through 2025 before optimising for greater capital efficiency to achieve $200 billion in NNA annually by 2028. UBS is also eyeing to reduce its underlying cost-income ratio to 70% by 2026, down from 87.7% at the 2023 end.

Asia will likely continue to play a prominent role in UBS’ growth roadmap. Let’s check the figures. UBS’ wealth management arm in Asia saw its assets surge by over $200 billion in 2023. Overall invested assets totalled $645 billion, marking an increase of 51%, or $217 billion, compared to $428 billion at the 2022 end.

Net new asset inflows were $13.5 billion for the fourth quarter. The bank recorded a pre-tax profit in Asia Pacific of $97 million in the 2023 fourth quarter, down 45.5%. This was driven by the consolidation of Credit Suisse revenues which were partly offset by lower net interest income. Loans decreased 4% to $45.8 billion, primarily reflecting $2.5 billion of net new loan outflows.

The bank’s cost-income ratio in the region also soared from 69.7% to 87.7%, coinciding with an expanded workforce, as the number of client advisors grew to 1,101 compared to 847 at 2022 end. Compared to Asia, UBS earned net new assets worth only $21.8 billion in other parts of the world.

UBS has recently undergone a revamp with the aim of achieving growth in Asia in a more diversified manner. Prior to the merger with Credit Suisse, UBS was already a dominant player in the Asia-Pacific region. Following the merger in March 2023, UBS gained access to the South APAC clientele of its now-defunct rival.

As per the reports, within its APAC wealth unit, UBS has set a deadline of end-2024 to complete the migration of Credit Suisse clients and products in Hong Kong and Singapore.

UBS was the top wealth advisor in the Asia-Pacific in terms of value and volume, stated GlobalData’s Deals Database, as the Swiss banking major advised on 32 deals worth a total of $27.7 billion in 2023. JP Morgan was placed second, advising on deals worth a total of $26.1 billion, followed by Citi, which advised on deals worth $21.8 billion.

GlobalData lead analyst Aurojyoti Bose said, “UBS was the top adviser by volume in 2022 as well. Meanwhile, its ranking by value took a massive jump and it went ahead from occupying the 27th position in 2022 to top the chart in 2023. UBS advised on seven billion-dollar deals, that also included one mega deal valued at more than $10 billion. Against this backdrop, UBS registered a 123.5% jump in the total value of deals advised in 2023 compared to 2022.”

When the Swiss government-choreographed merger happened between Credit Suisse and UBS, there were apprehensions about the move’s future, as Credit Suisse was marred by scandals and financial irregularities. Analysts were concerned about UBS’ future. UBS did experience consecutive quarterly losses, which was unprecedented in its history of operations.

By February 2024, the venture has also achieved a few other firsts, be it becoming a European giant in the field of deal-making or maintaining its status as the top wealth advisor in the Asia-Pacific region since 2022. At the same point of time, the venture has also been strategically brilliant, when it comes to restructuring the staff. Instead of blindly mass firing everyone, it has taken a detailed look at the talents in Credit Suisse who can help the Swiss banking giant to continue its expansion and has inducted those faces into their organisational folds.

CEO Sergio Ermotti sees his venture’s progress over the next three years not being something “measured in a straight line.” If no major bump comes in those three years, the much-debated Credit Suisse-UBS merger may very well turn into a much-celebrated one.

The post UBS’s Credit Suisse takeover: From crisis to success appeared first on International Finance.

As per the November 2023 estimates of the Yale School of Management, over 1,000 foreign businesses have publicly announced about voluntarily curtailing their Russia operations to some degree beyond the bare minimum legally required by international sanctions, while some ventures have continued to operate in the country undeterred.

Our story will revolve around these ‘Some Ventures’ and why leaving Russia now looks not so easy for companies in general, despite another central Asian country called Kazakhstan (which wants to be an economic powerhouse in the region) reaching out to hundreds of American and European entities with an offer of hosting the latters’ operations, since the 2023 beginning.

Companies bucking the trend

Leading Beverage giant Peet’s Coffee is staying put in Russia, with its parent company JDE Peet’s informing the media about “actively shaping a longer-term future in Russia” as the Ukraine war is all set to be a long-term affair. In fact, Peet’s Coffee is now planning to rename its Russian operations to protect its global reputation. Unlike its industry peer Starbucks, JDE Peet’s sees a major downside of leaving Russia in the form of its brands and intellectual property likely being seized and given to a third party, apart from putting the future of its 900-odd staffers’ futures at a massive risk.

One of the challenges before Unilever’s new CEO Hein Schumacher is to re-examine the company’s Russian operations. Schumacher reportedly received a letter from a Ukrainian war veteran who wanted the Anglo-Dutch conglomerate to exit Russia. Unilever has also been named an ‘international sponsor of war’ by the Ukrainian government for continuing its operations in Russia despite the conflict.

“A year later, Unilever Russia’s profits doubled from 4.8 billion roubles (USD 80 million) in 2021 to more than 9.2 billion roubles (USD 153 million) last year. In addition, thanks to the significant amount of profit obtained… [Unilever Russia] managed to increase the capital to 34.5 billion roubles in 2022 from 25.3 billion roubles in 2021,” Ukraine’s National Agency on Corruption Prevention remarked.

However, the FMCG giant has been so far defending its decision to remain in the country, as it sees carrying on selling “everyday food and hygiene products” to the Russian people as the best available option for it, rather than its business ending up in the hands of the Russian state. Along with Unilever, Olay-owned P&G and L’Oréal have continued their operations too.

Lack of choices

On September 2023, the Vladimir Putin government dropped a massive bombshell, as it announced imposing increasing costs for corporate breakups by foreign banks, along with the demand of unfreezing the Russian assets if these overseas financial entities wanted to exit the market.

“We have stated our position, and it stands — we will be tough in letting foreign banks go, it will depend on the decision to unfreeze Russian assets,” Alexei Moiseev, Russia’s deputy finance minister, informed the media.

In fact, Western and its allies have frozen over $300 billion in Russian central bank assets abroad as part of their sanctions on Moscow. What Moiseev remarked, reiterates the Putin regime’s stance of punishing the companies trying to exit the Russian market.

Despite 1,000 companies voluntarily cutting back on operations merely two months after the Ukraine war started back in February 2022, just 535 foreign companies have made a clean break with the country, an ongoing study from Yale University that was last updated in September 2023 has found.

As per the reports, over 2,000 companies have sought approval to exit the Russian market, but they were facing slow progress on this front. Also, Moscow has taken the game further by charging exiting companies a fee of at least 10% of the sale value of the local businesses. In addition, the Russian government has reportedly started requiring sellers from “unfriendly countries” to donate at least 10% of the sale proceeds to the Russian budget from March 2023.

Raiffeisen Bank, the largest Western bank still operating in Russia and working on a sale/spin-off of its local business, said in its half-year report released on August 1, “The local and international laws and regulations governing the sale of businesses in Russia are subject to constant change.”

Even in August 2023, Raiffeisen is in no situation to give a timeframe for the sale/spin-off of its Russian subsidiary. Johann Strobl, the CEO of the Austrian venture, told the media that the whole process required approval from many Russian authorities and European ones. The bank was aiming for a spin-off of its Russian business by the 2023 end and was eyeing a September timeframe for completing the move.

The European Central Bank has been pressing Raiffeisen to unwind its highly profitable Russian business. The concerned venture, on the other hand, reportedly takes care of the financial needs of its 3 million Russian customers and any exit measure from the country, no doubt, needs a properly planned and implemented action plan, to avoid the chaos. Raiffeisen is in a perfect ‘Catch-22’ situation right now.

Why is it so difficult?

In March 2023, the Financial Times, while citing a person involved in a business exit negotiation in Russia, found out that the authorities in Moscow, who handle these applications, were meeting only three times a month, while reportedly considering up to seven applications each time, thereby prolonging the exit process for the businesses.

To cut a long story short, if you want to leave your Russian operations, it’s not that easy to pack up and go.

“Many companies were quick to announce their intent to leave the Russian market after it invaded Ukraine. While some big brands such as McDonald’s, and Starbucks have fully exited the country, others may be taking a slow and orderly approach to their exit strategy for various reasons,” Business Insider noted.

Also, we have examples like Peet’s Coffee, where companies are taking a serious relook at the obligations to their local employees while deciding to leave/stay.

“Our colleagues in Russia have, through no fault of their own, endured months of stress and uncertainty,” stated IBM CEO Arvind Krishna recently. His venture was one of the earliest companies to exit the Russian market.

“We do not think it is right to abandon our people in Russia,” Unilever echoed similar sentiments in February 2023. The conglomerate has stopped all imports and exports of its products and capital flows into and out of Russia since 2022, but it has reportedly continued to supply made-in-Russia products domestically.

“It is clear that were we to abandon our business and brands in the country, they would be appropriated – and then operated – by the Russian state. To date we have not been able to find a solution which avoids the Russian state potentially gaining further benefit,” the European venture added further.

On March 2022, just barely two weeks into its Ukraine adventure, Russia published a list of “unfriendly countries”, to combat the growing list of nations extending their support to Kyiv. The list included Australia, the United Kingdom, the entire European Union, Iceland, Canada, Liechtenstein, Monaco, New Zealand, Norway, Korea, San Marino, Singapore, the United States, Taiwan, Ukraine, Montenegro, Switzerland and Japan.

Countries like the United States, EU, Canada and Switzerland issued sanctions against Russia, Russian oligarchs, and Putin as the war broke out and businesses from these countries also have a heavy presence in Russia.

As per Moscow’s latest rule, investors who want to sell their businesses and are from “unfriendly countries” must donate at least 10% of the sale proceeds to the Russian Budget. On top of that, these investors will also need to bear a 50% cut on the sale of their assets.

Apart from all these, the concerned businesses also need to obtain state approvals before they start the departure procedure. “What about the Russian staffers whose jobs will be at the firing line?” add this to the ‘Priority List’ for businesses as well.

Recently, Business Insider reported that the “companies that want to exit Russia are pressed to find buyers for their Russian operations who would continue running the business under a different brand. The pool of buyers is also limited due to international sanctions against Russia.”

McDonald’s sold its Russian business to a local licensee after the Ukraine war broke out. The buyer was required to continue employing and paying all of the fast-food giant’s staff in Russia for two years after the takeover, as per the handover deal terms.

Aluminium oligarch Oleg Deripaska told the Krasnoyarsk Economic Forum in Siberia in March 2023, “Russia will need foreign investors as its funds are running low. There will be no money already next year (2024).”

Russia needs to keep its economy running and for that it needs capital. The foreign ventures, especially those from the West, want to leave the country sooner, to avoid the media glare of operating in an ‘Enemy Nation’. However, the departure rules set by Moscow make these businesses unfairly pay for their strategic decisions, while keeping the Russian exchequers full for sustaining the war efforts.

Even if these multinationals come out of Russia, they will face their global operations being impacted “if a subsidiary in one place is closed,” Saul Estrin, a professor at the London School of Economics, and Klaus E. Meyer, a professor at Ivey Business School, explained in a note.

Citing McDonald’s and Starbucks as examples, these experts wrote, “This interdependence may be small when the subsidiary solely has a sales and service role. However, the interdependence is high and disruptive for the parent organisation when the subsidiary is procuring critical raw materials or intermediate products for the parent that cannot easily be obtained elsewhere.”

“Complex global supply chains mean that companies such as those in the automotive and machine tool industries would have to change their procurement processes if they close an operation,” they added further.

Russia’s tactical brilliance

Russia’s demand for a 50% discount on the assets of companies exiting its market has benefited the country’s businessmen who bought the assets of 110 Western companies “that have fully or partially left Russia” at bargain-bin prices, as per independent Russian newspaper Novaya Gazeta.

“More than 100 new major asset owners have emerged in Russia since the war began. The assets of Western companies, usually acquired for next to nothing, have already bought them at least 223 billion roubles (€2.2 billion) in net profit last year (2022). Among the beneficiaries of the redistribution of Western assets are businessmen close to the Kremlin, former top managers of the companies that have left Russia, and medium-sized businesses,” the report noted.

“The departure of Western businesses enabled Russian businesspeople to acquire large assets at huge discounts or for the measly sum of one rouble (€0.010) — virtually for free. Companies that have decided to leave Russia at any cost are forced to make such deals because of the rules set by the government which mandate discounts and contributions to the state budget,” it stated further.

As per Reuters, some ventures trying to exit Russia were facing demands of even steeper discounts than the 50% one, with those operating in strategically important sectors like energy and resources needing President Vladimir Putin’s seal of approval, before they exit the country.

Just before the Ukraine war, Russia approved measures that could lead to the nationalisation of foreign firms suspending their operations in the country’s domestic market.

In April 2023, Moscow took control of the Russian subsidiaries of two energy firms, Germany’s Uniper and Finland’s Fortum, after Putin signed a decree ordering the move.

The Kremlin defended the move as it stated that the seizes were in retaliation to the “similar moves from Western nations”, as the latter reportedly blocked/seized $58 billion of assets controlled by Russia in the one year since the beginning of the Ukraine war.

“In July, Moscow targeted the Russian assets of food and beverage giants Danone and Carlsberg for seizures. Russia did not give any specific reasons for the seizures, but they happened after people close to Putin’s regime expressed interest in the assets,” Business Insider noted.

Nabi Abdullaev, a partner at Control Risks and former editor of the Moscow Times, summed up the situation perfectly, as he told CNBC, “Some companies decide to stay because the risk of leaving Russia, at this moment at least, is higher than the risk of staying.”

The Ukraine war and the resultant economic warfare between Russia and the United States-led Western Bloc have made the scenario a dangerous one for Western companies. If they want to leave the country, they may end up jeopardising their assets being taken by the state, apart from what Abdullaev termed as “criminal prosecution of Russian staff”.

Along with Unilever, Nestle, Philip Morris, UniCredit, Raiffeisen and PepsiCo, some 500 Western firms are still operating in Russia. While they are looking for buyers before they leave or cut down their operations in the country, they have to pay taxes to the Russian government. This tax amount is subsequently getting diverted to Moscow. While these ventures are getting branded as “international sponsors of war,” they are not doing it willingly.

Beverage giant Heineken had 1,800 staff in its Russian unit and was unable to execute a quick exit. On August 25, the venture found a buyer in the Russian Arnest Group which purchased the companies’ Russian operations for a euro.

“Western companies that remain in the country are able to continue doing business because, despite sanctions, numerous transactions and activities are still authorised. As part of the ‘smart’ sanctions approach, the civilian and humanitarian sectors are not targeted, and many Western companies continue to operate in these sectors,” CNBC commented.

However, most of these ventures belong to the nations marked as “unfriendly countries” by Russia. So technically, these ventures are at the mercy of the Kremlin. Add the nationalisation of Uniper and Fortum, the territory gets stickier for these businesses.

The post The ‘Russian Minefield’ for Western businesses appeared first on International Finance.

According to Azevedo, “so far, it’s had a very muted impact,” and “if it stays contained, we don’t really believe there will be much of an impact.”

He claimed that the influence of recent US inflation figures has fueled even more rumours about rate hikes in the future.

The Middle East region’s IPO landscape is “resilient” despite “nervousness and volatility” in the markets, the report stated, adding that Azevedo anticipates the pipeline to stay “very solid” for the coming year.

According to Turkish-American consultant and economist Nouriel Roubini, markets are underestimating the possibility of a big conflict involving Iran and Lebanon, which would interrupt the Gulf’s oil supply and have a significant economic impact, according to Bloomberg.

According to the international accounting company EY, in the first half of 2023, the MENA IPO market had 23 IPOs, down 4% annually, valued at USD 5.2 billion.

According to a survey by EY, the MENA region has a promising pipeline for the remainder of the year, particularly from Saudi Arabia, where 23 Saudi companies have declared their intention to list on the Tadawul in the second half of 2023.

There Are Casualties Though

However, Egypt’s Orascom Development expects the tourism sector and foreign direct investments in the Middle East region to be affected by the fallouts of the Gaza conflict.

The Switzerland-listed company, with assets worth over USD 2 billion, is currently involved in the development of integrated townships with residences, hotels, retail and other amenities in seven countries including Egypt, Switzerland, Oman, Morocco, England, Montenegro and the UAE.

“I think foreign direct investment in the region is going to probably take a hit (in the short term) because most people, most foreign investors, particularly Western investors, don’t necessarily fully understand that the interlinkages between different parts of the region, where the real direct effect is, where the indirect effect is?,” Omar El Hamamsy, group chief executive of Orascom, told The National.

“Tourism revenue will decrease because people will feel that there is a security concern,” Omar El Hamamsy stated further, while adding, “That will be another unfortunate hit on our business and more generally, on tourism in the region, which will hit the current accounts of many North African countries as well as some of the GCC countries.”

The official also noted that due to the conflict, capital accounts operating in the MENA (Middle East and North Africa) region would be negatively impacted in the short term as investors might be hesitant to invest in the region due to geopolitical volatility.

As the armed conflict broke out in the first half of October 2023, US Treasury Secretary Janet Yellen said that Washington was monitoring the economic impact of the crisis. However, she didn’t expect it to be a major driver of the overall global economic outlook.

JP Morgan chief executive Jamie Dimon, while weighing on the situation, remarked that the Israel-Gaza war could have serious geopolitical consequences for the global economy.

“The war in Ukraine, compounded by last week’s attacks on Israel, may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships,” Mr Dimon said.

The post Discussing impact of Gaza war upon MENA’s dealmaking, tourism and FDI activities appeared first on International Finance.

In its April 2023 ‘Global Financial Stability Report’, the International Monetary Fund issued a warning that “financial stability risks have escalated quickly as greater concerns about inflation and fragmentation have put the resilience of the global financial system to the test.”

Smaller emerging economies with significant debt and declining repayment capacity have the most unstable banks. The IMF expects a dire financial climate due to increased geopolitical concerns, unmanageable debt, rising inflation and interest rates, and tighter monetary conditions. It was closer than anyone admitted during those stressful March days.

“The lightning-fast, forced takeover of Credit Suisse by rival UBS had helped to avoid a national calamity,” Swiss Finance Minister Karin Keller-Sutter said in Washington in April.

Switzerland’s central bank director, Thomas Jordan, said the takeover prevented Credit Suisse from “being the first domino in a systemic collapse.”

A systemic crisis

The crises around United States’ banking majors like Silicon Valley Bank, Signature Bank, First Republic Bank and their Swiss counterpart Credit Suisse have revealed systemic problems that require immediate attention. There is a contagion worry around the financial circles in Europe and the United States, and this worry is now bothering regulators.

The Swiss government deserves recognition for moving fast and decisively to rescue Credit Suisse, as its quick deployment of resources prevented a 2008-style banking catastrophe.

On the other hand, American depositors were so nervous about the future of their deposits, that they started withdrawing those capital en masse from the domestic banking sector. The Federal Reserve too expressed worry, which didn’t help the matter either.

“It appeared like contagion from SVB’s bankruptcy may be far-reaching and inflict damage to the broader financial system,” said Fed vice chairman of Supervision Michael Barr.

Michael Barr also said that if the customers can’t access their money, depositors may start distrusting US commercial banks’ safety and soundness.

Potential risky behaviour

As we shall see, both banks somehow slipped the leash of risk-averse management that authorities imposed on them after 2008. The obvious question is: have the global giants returned to the reckless behaviour that caused the financial crisis?

After the Credit Suisse panic, French and German authorities raided five giant banks for possible money laundering and tax evasion on behalf of wealthy clients, highly illegal activities that had enraged regulators after the 2008 revelations of egregious behaviour.

Since 15 years of reforms were designed to eliminate banking shocks, the question is significant. National regulators ordered a wide range of measures that separated investment from deposit banking, boosted capital ratios and liquidity, sheeted home responsibility onto specific senior executives, eliminated sky-high undeserved bonuses, and, most importantly, ensured a tottering institution could collapse without triggering a house of cards, as happened in 2008. No bank could be “too big to fail.”

Meanwhile, authorities scrutinized systemically significant institutions (G-Sibs), which bankers sometimes hated.

Despite all this regulation, 49-year-old Silicon Valley Bank failed in 24 hours after what the US Federal Reserve called “a devastating and unexpected run by its uninsured depositors,” while once-mighty Credit Suisse was bundled into USB, its supposed rival, with indecent haste before it failed. Credit Suisse’s viability has long troubled Swiss regulators.

Credit Suisse might earn over $17 billion in 2022 from financing Swiss railroads. The second-largest Swiss bank seemed impregnable until a year ago. Swiss banks are known for their strength, dependability, and prestige. The major Swiss regulator, FINMA, is also held in high regard. The Swiss government had to quickly raise $122 billion to save Credit Suisse. The new guidelines say even a G-Sib’s failure shouldn’t cost taxpayers.

In the US, SVB was not for sale, even at gunpoint. The Federal Deposit Insurance Corporation, which ensures financial stability and confidence, followed the book, or “hierarchy,” as central bankers believe. The FDIC swiftly guaranteed SVB and Signature Bank’s insured deposits after a run on deposits caused them to fail. Troubleshooting regulators took over after the US Fed fired senior managers overnight.

Most significantly, the Fed guaranteed up to a year’s worth of liquidity to other banks, preventing future runs. As per the post-2008 hierarchy, SVB equity and liability holders lost their investments.

Speculation & effects

These failures have various effects. Credit Suisse, with operations in the US, Europe, the Middle East, and internationally, has substantially higher numbers. The effects may last for years. UBS, with $1.1 trillion in assets and $34.6 billion in sales, may be able to swallow its rival, mainly due to its doubtful assets. The takeover creates a $5 trillion entity, but nobody knows how much of Credit Suisse’s assets will be written down.

Credit Suisse stockholders lost money, and FINMA will value its tier-one bonds at zero. UBS will buy Credit Suisse for $3.3 billion, a fraction of its pre-failure value.

Reading between the lines, the US Fed was astounded by Silicon Valley Bank’s collapse. Supervisor Michael Barr told the House Committee on Financial Services that management’s failure to manage liquidity risk, its largest responsibility, and the run killed the bank. According to media reports, management prioritized development over stability and ignored internal stress testing that highlighted issues.

Why run, and why now? The Fed seemed bewildered and embarrassed. Michael Barr stated, “SVB’s failure warrants a full assessment of what happened, including the Federal Reserve’s monitoring of the bank.”

It is already known that SVB had a focused business model and that its customers were mostly in the high-risk but potentially lucrative technology and venture capital industries. The bank had been established for over four decades, but in the three years leading up to 2022, it tripled its assets as the IT sector boomed. Concerns should have arisen. Before 2008, fast-growing institutions like the Royal Bank of Scotland failed on both sides of the Atlantic.

The Fed says SVB invested fast-growing deposits in longer-term securities with higher yields without the necessary expertise: “The bank did not effectively manage the interest rate risk of those securities or develop effective interest rate risk measurement tools, models, and metrics.”

The bank also neglected its liability risks. Senior executives fell into the liability-asset mismatch trap. Media reports suggest some personnel had severe concerns about their boss’s decisions. SVB’s troubles stemmed from the technology sector’s need to hold cash deposits in the bank to cover salaries and operating costs. However, cash deposits can be removed at will and often are.

On March 8, SVB realized it wasn’t liquid enough and announced a $1.8 billion loss in a securities transaction but expected to raise funds the following week. That alerted its clients, and some of America’s brightest examined their bank’s balance sheet.

Michael Barr stated, “They did not like what they saw,” in typical US fashion.

On March 9, SVB clients withdrew over $40 billion, demonstrating how insecure a supposedly well-funded bank may be. SVB collapsed the following day as other depositors followed suit. The nightmare of regulators and bankers, an unstoppable run by depositors, took SVB down in three days.

Slow decline

Credit Suisse’s demise appears to be a case of bad management and, as the US Fed admits, supervisory errors, while SVB’s was a case of terrible management and political interference. Unlike in the US and UK, FINMA did not release more than 100 red flags to the bank regarding its many faults during its slow decline.

Credit Suisse was in trouble by 2021 due to $10 billion in losses on client funds invested in Greensill Capital, a massively indebted British supply chain finance firm, and $5.5 billion in US hedge fund Archegos Capital Management.

The integrated global finance sector failed both in 2021. Credit Suisse lost the most in these disasters. Former bank CEO Thomas Gottstein said these blunders were “awful.” Credit Suisse was unlikely to recoup any capital in Greensill and possibly none in Archegos at the time of writing.

These disasters followed years of risky investment banking by Credit Suisse, which had brought down US banks like Lehman Brothers in 2008. Wealthy clients fled, the share price fell, and the bank’s credibility, any institution’s most valuable asset, collapsed. Swiss Info, a Swiss Broadcasting Corporation magazine, says that the bank’s leadership is to blame.

Events quickly deteriorated. In October 2022, Swiss authorities installed a new management team to fix the investment bank firm. “The bank will build on its outstanding wealth management and Swiss Bank franchises,” it said, returning to its roots.

At the time, FINMA Chairwoman Marlene Amstead called this spring clean “a start in the correct direction towards risk reduction.”

The bank had a record-breaking client fund run in the same month. In the fourth quarter, withdrawals reached over $155 billion, and although Credit Suisse survived again, the writing was on the wall.

The two occurrences highlighted “too big to fail” for systemically important organizations. The financial crisis reforms created a two-part worldwide norm. The bank is either a “going concern” that can be saved or a “gone concern” that will be properly buried. The global standard defines a “going” bank as one that has enough capital to cover current business losses and a “gone” bank as one that can be restructured or liquidated.

The Credit Suisse takeover is the first real-world test of the “gone” part of “too large to fail.” No banking authority is ignoring this case study, which has garnered global attention. FINMA’s Marlene Amstead believes Switzerland did the right thing in a communal solution combining taxpayer money, the government, regulators, the central bank, and UBS’s consent.

However, Credit Suisse may have caused a financial disaster if it failed. Does that mean the entire “too big to fail” architecture must be overhauled after the debacle?

Regulatory failures

In a bank disaster, regulators must take responsibility, and they typically do. The Bank of England’s “regulation-lite” faith in management was abandoned during the Great Financial Crisis.

After SVB was classified as a higher-risk “big and foreign financial organization” with $100 billion–$250 billion in assets, its supervision was transferred to a new team. It’s not a G-Sib, but any organization with up to $250 billion in assets is important.

The new team instantly rated its enterprise-wide governance and controls “deficient-1” due to management concerns. Supervisors met with management in November 2022 to discuss rising risks, particularly in interest rates and liquidity, which pose some of the greatest threats to a bank’s integrity. They also worried about rising interest rates affecting SVB and other banks.

The supervisors did not anticipate that it would collapse so quickly. Banks and regulators often clash. While most banks follow the rules and want to follow supervisors’ advice, some must be judged. Because of judicial enforcement, regulators usually win with resistant banks.

Most of FINMA’s 40 annual enforcement proceedings in Switzerland never go public. FINMA conducts 600–700 investigations a year, which require inspectors to knock on doors “to clarify suspected infractions.” In nine out of 10 situations, banks take corrective action when presented with evidence, but Credit Suisse’s refusal was a significant issue.

FINMA states that institutions rarely ignore investigations and multiple judgments. Thus, Swiss authorities are privately discussing Credit Suisse’s case. No country can accept an institution that bullies the regulator, and Switzerland was exceptionally weak.

Central bankers like the Bank of England, the US Fed, and others can name names.

“As the events around Credit Suisse illustrate, our instruments reach their limits in severe cases,” says Marlene Amstead, who wants additional power. “An extension is worth considering.”

Historically, politicians have been hesitant to grant FINMA the necessary authority. Unlike France, the UK, and the US, FINMA lacks the ability to impose fines. Following a prolonged discussion, Swiss politicians ultimately voted against the merger of Credit Suisse and UBS.

Functioning properly

In a broad internal evaluation, the Fed asks if the regulatory regime is effective.

“Once discovered, can supervisors discern concerns that constitute a serious danger to a bank’s safety and soundness? Supervisor Michael Barr asked the House of Representatives, “Do supervisors have the instruments to reduce threats to safety and soundness?”

“The failure of SVB highlights the need to go on with our work to increase the resilience of the banking system,” he added.

Thus, supervisors should be tough before it’s too late. The US Fed wants to apply Basel III regulations to smaller banks like SVB because they can withstand losses better than the G-Sibs. The financial sector will be closely monitoring the Fed’s proposed new set of stress tests, which cover a wider range of risks and reveal contagion channels. That implies that present stress-testing technology fails.

Contagion is often irrational. In the current banking system, insured depositors get their money out, but dread spreads without explanation. Fintech’s emergence represents a hidden weakness in the post-2008 global banking system. They’re faster, cheaper, and more customer-friendly, weakening the giants’ financial dominance. For example, US banks are smaller.

US Fed Governor Michelle Bowman said, “De novo [new] bank development has largely frozen for the past decade during a period when financial services have quickly evolved.”

New banks are smaller, more conservative, and, surprisingly, safer.

“As we have seen over time, they often outperform larger banks during periods of stress like the pandemic and during the 2008 financial crisis,” Governor Michelle Bowman said.

They also treat small businesses better during rough times. That may drive depositors away from giants. Bank capital may be insufficient in the future. Regulators admit they weren’t before the Great Financial Crisis, and the latest concern is pushing for a reassessment.

Undercapitalized banks have serious repercussions. The 2008 banking crisis caused the longest and deepest recession since the Great Depression. America, the world’s wealthiest nation, saw six million foreclosures, 10 million people fall into poverty, and six years of job losses. Research suggests the impacts persist.

Central banks are worried about the resumption of the run on deposits, but nobody is predicting a worldwide banking collapse. In a post-Credit Suisse debate, Bank of England Governor Andrew Bailey said, “We’re in a very different place, and I genuinely don’t see this as the start of a systemic financial crisis.”

No central banker would disagree, but the tremors created by SVB and Credit Suisse’s collapse have revealed systemic flaws that must be fixed.

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