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‘A dark day’: How Switzerland reacted to shock UBS buyout of Credit Suisse

Switzerland was in shock after its largest bank had agreed under pressure from Swiss authorities to swallow up the second largest for €3.25 billion, in what the government insisted was a vital step to prevent economic turmoil from spreading throughout the country and beyond.

'A dark day': How Switzerland reacted to shock UBS buyout of Credit Suisse
The three keys USB logo is seen outside the London office of Swiss bank UBS in central London, on March 20, 2023. (Photo by Daniel LEAL / AFP)

Swiss media and politicians alike expressed outrage felt that one of the country’s oldest and most iconic banking institutions went poof, insisting that despite a string of crises and scandals, it could have been saved.

Swiss authorities faced criticism for reacting too slowly as Credit Suisse — seen as the weakest link in European banking after several years of unrelenting scandals and crises — saw its share price implode last week amid market turbulence over the collapse of two US banks.

On the worst day of trading Wednesday, when Credit Suisse saw it share price drop to historic lows, the central bank and regulators took a full day to announce a $54-billion lifeline for the bank, and the government waited until Sunday evening to speak publicly about the debacle.

‘Historic scandal’

Thierry Burkhart, head of Switzerland’s rightwing Liberals party, described the deal as “shameful for Switzerland”, and said Sunday was “a dark day for the Swiss financial sector and for Switzerland as a whole.”
 
The Tages-Anzeiger daily meanwhile slammed the deal as “a historic scandal”, while the Tribune de Geneve said it was a “waste, socially (for jobs), economically (for the reputation of the country), and shameful politically for the politicians who were too slow to act.”

Many acknowledged though that when push came to shove, there had been little choice. The government had said the only alternative to the UBS deal was a full nationalisation of Credit Suisse.

The deal was the “best solution for restoring the confidence that has been lacking in the financial markets recently”, Swiss President Alain Berset told reporters Sunday.

If Credit Suisse went into freefall, it would have had “incalculable consequences for the country and for international financial stability”, he said. UBS meanwhile is entering this forced marriage in full health, having raked in a $7-billion net profit in 2022.

‘Significant risks’

But the mega-merger is not without risk for the institution and beyond. While “the deal could draw a permanent line under the Swiss banking sector’s problems,” Capital Economics analyst Andrew Kenningham cautioned in a note that “the track record of shotgun marriages in the banking sector is mixed.”

“Further substantial losses in the legacy bank cannot be ruled out and this could affect confidence in the enlarged UBS and/or prompt demands for further state support.”

Vontobel analyst Andreas Venditti agreed. “There are many uncertainties and significant risks,” he wrote in a note, warning that “the UBS investment case changes substantially.”

“The issues currently impacting the global banking sector are not over.” UBS was already the global wealth management leader, but the deal will create a behemoth managing a total of around $3.4 trillion.

The merger could also have dire consequences for jobs in Switzerland, where UBS and Credit Suisse have significant overlap in their businesses, and each with their own branch offices in every Swiss town and village.

A commentary piece in the Neue Zurcher Zeitung meanwhile voiced alarm that authorities were allowing UBS, already a behemoth on the world stage, to balloon further, making it “even more too big too fail”.

“A zombie is disappearing, but a monster is in the process of being born.”

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RENTING

Why there is a push in Switzerland to make buildings higher

Tall residential buildings are not very common in Swiss cities, but efforts to change this are gathering strength.

Why there is a push in Switzerland to make buildings higher

Many of Switzerland’s cities are suffering from a chronic housing shortage, with the demand for accommodation far exceeding the available supply.

Though a number of measures have been proposed — for instance, loosening certain regulations which slow down construction of new buildings, such as noise ordinances — the Swiss Tenants Association has said current plans lack “rapid and effective measures.”

READ ALSO: Why Swiss tenants are unhappy with plan to solve housing shortage

Reaching new heights

Another possible solution currently on the table addresses the scarcity of land for new constructions.

“This is why expansion must absolutely take place at height,” the Liberal-Radical Party (PLR) said in a press release

This means that additional living space should be created on top of current residential buildings.

To that end, “building and zoning regulations in Swiss cities must be adapted so as to systematically integrate the raising of one or two floors into urban plans.” 

“In addition, in all residential areas, the maximum authorised height of existing buildings should be  increased by at least three metres. This should make it possible to add an additional floor or two for housing, where possible,” the party states.

The ‘where possible’ clause would exclude historic buildings that cannot be altered and ones where adding more floors is not feasible for technical reasons.

Building ‘upwards’ not only creates space for more dwellings, but also helps stop urban sprawl and preserves agricultural land, according to  PLR’s MP Simone de Montmollin. 

What might happen next?

The party has started an online petition, which it urges all Swiss citizens who favour this change to sign. 

“Building and zoning standards in Swiss cities must be adapted so that the maximum permitted height for existing buildings in all residential areas is increased by three metres,” its text says. “This should make it possible to add an additional floor for housing, independently of the existing use.”

If and when the petition collects at least 100,000 signatures, the issue would be brought to a ballot box.

No details are available about the number of signatures collected to date.

Historic perspective

While the idea may sound ground-breaking, it is not.

As de Montmollin pointed out, already in the 16th century, houses were raised in Geneva to create accommodation for persecuted Protestants (Huguenots) fleeing France.

Much more recently, such ‘elevations’ have been possible in Geneva thanks to a law passed in 2008.

And in Zurich, the PLR, along with a multi-party coalition, launched a popular initiative for the raising of existing buildings.

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