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Why wealthy Americans love UBS, the secretive Swiss banking giant

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With its $3.2 billion acquisition of Credit Suisse, UBS is poised to climb the ranks of global mega banks.

UBS is no stranger to blockbuster mergers. The modern company is comprised of over 370 legacy firms, including former domestic rivals. Amid major wars, Switzerland has remained stable and neutral, becoming a safe haven for global wealth.

Today, international wealth management is the heart of UBS’s operation. With over $5 trillion in invested assets post-merger, more than half of the bank’s customers are based in the United States. Experts believe this is due to the unique levels of discretion offered by Swiss law. Bankers in Switzerland are bound to protect many client details, even when pressed by foreign authorities. 

“You can access their operations in Singapore, in New York, in more exotic places. But at the core, they will not be subject to some political influence because the Swiss government is leaving them alone, or at least that’s the perception,” said Nicolas Véron, a senior fellow at both the Peterson Institute for International Economics in Washington, D.C., and the Bruegel think tank in Brussels.

In recent years, both UBS and Credit Suisse have faced pressure from U.S. authorities to end what has been criticized as dubious business practices. For example, in the 2010s, thousands of instances of misconduct were uncovered at UBS in an international interest rate manipulation probe. Additionally, U.S. senators claim that Credit Suisse maintained accounts linked to Nazi clients as recently as 2020.

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Global watchdogs have worried for years that banks like UBS have become too big to fail. A sudden and rapid flight of depositors from Credit Suisse brought those fears to life. The Swiss National Bank pledged over $100 billion in liquidity support to broker UBS’s rapid takeover of Credit Suisse.

In the deal, Credit Suisse shareholders expect to trade in 22.48 shares for 1 UBS share. Some bondholders plan to challenge the deal in court.

“By and large, what the Swiss government mostly did is impose losses on creditors and shareholders of Credit Suisse,” said Véron.

UBS Group AG said the acquisition may make the bank more competitive globally, and that it is prepared to manage that increased complexity.

Watch the video above to learn more about UBS’s future as Switzerland’s top bank.

Source: CNBC

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