Swiss megabank UBS was always too big to fail. After the merger with Credit Suisse, it is even bigger: Its balance sheet is twice as large as the Swiss GDP. As the coming financial crisis has become visible for everyone who has eyes to see, no wonder that a debate on “bailout: yes or no?” has resurfaced in Switzerland.
UBS is a global leader as a gateway for its wealthy clients and institutional investors to access the private credit market, exactly the market where subprime loan defaults have begun to emerge, a potential trigger of a global crisis similar to the subprime mortgages in 2008.
In this context, whereas the Swiss government (Bundesrat) wants UBS to increase capital buffers, former Swiss People’s Party (SVP) leader Christoph Blocher has called for splitting the bank into an American UBS and a Swiss UBS. The logic behind this proposal is that UBS investment banking is concentrated in the U.S.A., whereas commercial banking and private banking is concentrated in Switzerland.
