Banks: merger with UBS to save Credit Suisse

After the massive loss of confidence in Credit Suisse, rival Swiss bank UBS wants to take over its stricken competitor. The largest bank merger in Europe since the financial crisis of 2008 is to be backed by the Swiss National Bank with up to 100 billion Swiss francs (about 101 billion euros). Is the merger a sensible step or will it create an unwieldy monster?

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Corriere della Sera (IT) /

Just too big

Corriere della Sera warns of the consequences of the merger:

“Switzerland will have a bank whose assets are twice as high as the country's GDP. ... So it remains to be seen who will really call the shots in the country: the government or the CEO of the largest bank? ... Even if the new company resulting from the merger of two of Europe's biggest banks is streamlined, it will still be too big for the country where it will have its headquarters and conduct a large part of its business. Too big to fail, but also too big to be rescued, as was the case with Credit Suisse.”

Frankfurter Allgemeine Zeitung (DE) /

Prosperity and jobs at stake

The Frankfurter Allgemeine Zeitung explains why everyone should be worried when banks totter:

“Because companies cannot survive for long without functioning banks and financial markets. In the end, the state guarantees and the billions in loans from the central banks are aimed at saving the real economy - and thus prosperity and jobs. Teetering banks are not an abstract matter. ... Employees who lose their jobs in a deep recession still earn less decades later. Moreover, financial crises have proven to be a catalyst for populism in the past. Nobody can want that either.”

Irish Independent (IE) /

Not the time for complacency

The Irish Independent is not entirely reassured and sees the need for further action:

“EU regulators and politicians promptly insisted that the fundamentals of European banks remained healthy - a phrase that, of itself, carries disturbing memories. We are further assured that what happened in Switzerland and California, with the collapse of Silicon Valley Bank, cannot happen in the eurozone. ... Such assurances are welcome but the EU has still not agreed on an umbrella European deposit guarantee fund. This was meant to make banks more resilient in any return to the horrors of 2008 by reducing the risk of bank runs. ... It's not time to panic, but nor is it the time for complacency.”

Kathimerini (GR) /

Greece not at risk of contagion

Kathimerini comments:

“The Credit Suisse crisis could spread to Europe and especially to weak Italian banks. Fortunately, having sold large percentages of their nonperforming loans and having received tremendous financial help from the Greek state, the four Greek systemic banks are now in much better financial shape than during the Greek economic crisis, and it is unlikely that they will face problems as a consequence of contagion from Credit Suisse.”

ABC (ES) /

The right reflexes this time

ABC seas a learning effect here:

“The sale of Credit Suisse marks a new record in the race in which central banks and governments on both sides of the Atlantic have scrambled to complete this operation in recent days. The experience of the 2008 disaster has prompted both sides to act swiftly to contain a spiral of contagion and prevent a major loss of confidence among investors. They have displayed reflexes that were lacking fifteen years ago and activated an early warning while at the same time reassuring the markets with a series of credible messages and concrete actions.”

Handelsblatt (DE) /

Threat of creating a fragile monster

Handelsblatt fears that the merger will exacerbate the problem:

“A strong big bank can take over weak small banks and restructure or wind them up. But when two weighty financial institutions merge, one stable and one fragile, then - as we have seen time and again - the risk is very high that what remains is a fragile monster. ... In the Swiss case, there is also the fact that each of these banks on their own - UBS and Credit Suisse - are already too wieldy for relatively small Switzerland, which makes it difficult for the government and the central bank to provide credible support. Against this background, a mega-merger is anything but a good idea.”

Neue Zürcher Zeitung (CH) /

There was another option

The Neue Zürcher Zeitung posits that a takeover by the state might have been the better solution:

“Switzerland has now rid itself of a zombie bank, but it will wake up on Monday with a monster UBS bank. 'Monster' because its new balance sheet total will be almost twice as large as Switzerland's economic output. ... The takeover of CS by UBS would most likely not have been the only option. ... The state itself could have put in an offer for the bank, also at a fraction of the share price. ... It could then have privatised the bank or parts of it as soon as possible, which would have prevented UBS from turning into a giant.”