UBS Construction Site Three Years After Credit Suisse Rescue

Context

TL;DR

• UBS completed Credit Suisse acquisition on March 19, 2023.
• 1.2 million clients and extensive systems migrated.
• 3,000 jobs to be cut in Switzerland, 1,500 already eliminated.
• UBS focuses on cost reduction and regulatory compliance.

Key facts

• Acquisition Date: March 19, 2023
• Clients Migrated: Approximately 1.2 million
• Jobs Cut: Around 3,000 in Switzerland, 1,500 already eliminated
• Investment: Approximately 250 million Swiss francs for restructuring
• Regulation Law: Law of June 19, 2023, updated cross-border work regulations
• FINMA Requirements: Intensified capital and risk management requirements from January 1, 2024
• UBS Profit 2022: 7.3 billion Swiss francs
• Systemic Banks Capital: Minimum requirement of 12.5%

UBS Construction Site Three Years After Credit Suisse Rescue

On March 19, 2023, UBS officially announced the completion of its acquisition of Credit Suisse, an operation that profoundly shook the Swiss and international banking sectors. This merger, one of the most complex in Swiss financial history, required unprecedented integration efforts, involving the migration of approximately 1.2 million clients and the overhaul of information systems, contracts, and services. The main challenge was to ensure operational continuity and security, avoiding disruptions for clients and business partners.

“The integration of Credit Suisse into UBS represents an unparalleled process in the Swiss banking landscape,” stated UBS CEO Ralph Hamers. Managing this operation involved over 10,000 professionals, including international teams and specialized consultants, operating also in Ticino municipalities like Lugano, Bellinzona, and Mendrisio, where many private banking and wealth management activities are concentrated.

Three years on, the completion of this complex phase allows UBS to start an internal reorganization process, focusing on cost reduction. In Switzerland, around 3,000 jobs are expected to be cut, with about 1,500 already officially eliminated, mainly in back-office and IT departments, with the rest planned for the coming months. This restructuring is part of a broader efficiency plan that also includes voluntary early retirements and social transfers, with an estimated investment of approximately 250 million Swiss francs, although official figures have not yet been fully disclosed.

Furthermore, UBS is approaching this phase with particular attention to European and Swiss regulations, including the review of employment contracts in line with the law of June 19, 2023, which updated cross-border work and professional mobility regulations between Italy and Switzerland. For example, the law states that cross-border workers in Ticino can benefit from tax advantages and access to social services, but must meet specific residency and tax criteria.

To manage this transition, UBS has prepared an operational checklist including:

• assessment and adjustment of employment contracts to new regulations;
• internal and employee communication plans;
• HR strategies for re-skilling and retaining key skills;
• implementation of updated information systems and staff training.

With this strategy, UBS aims to minimize talent loss risks and ensure business continuity, especially in private banking and wealth management segments, where Ticino is a strategic hub, with about 40% of Credit Suisse clients transferred to the region.

The greatest challenge remains human capital management, considering that the Swiss and Ticino banking sectors must also comply with directives from the Swiss Financial Market Supervisory Authority (FINMA), which from January 1, 2024, has intensified capital and risk management requirements.

UBS’s journey exemplifies how high-level bank mergers demand a balance between economic efficiency and skills protection, in a scenario that, despite its complexity, aims to strengthen Switzerland’s banking position globally.

Operational details

UBS Construction Site Three Years After Credit Suisse Rescue

Alongside the progress of technical and managerial integration between UBS and Credit Suisse, the Swiss political landscape is preparing to define key regulatory details for the banking sector. The focus is on future rules concerning the capital requirements of systemic banks, with direct implications for financial stability and the regional economy of Ticino, where many frontier activities such as advisory services and wealth management depend heavily on decisions made by major banking groups.

A second front has opened with the report from the parliamentary inquiry committee and the intervention of FINMA, the financial regulator. The authority aims to impose stricter fines, with sanctions potentially reaching up to 10 million francs for violations of capital regulations. However, the Swiss government, led by Finance Minister Karin Keller-Sutter, appears to prefer a softer approach to avoid damaging Switzerland’s international banking attractiveness. By summer, and possibly as early as April, the Federal Council will present proposed regulatory amendments, with particular attention to which assets can be considered as core capital, including software and tax credits, which some estimates suggest could account for up to 15% of the total capital requirement.

The debate also focuses on minimum capital requirements, currently set at 12.5% for systemic banks, and on defining parameters that can ensure stability without penalizing large banks like UBS, which posted a net profit of 7.3 billion francs in 2022 and accounts for about 30% of the total Swiss banking capital. Overly strict rules could limit UBS’s and other major banks’ investment and growth capacity, such as Julius Baer and Zürcher Kantonalbank, while overly lenient regulations risk reintroducing the dangers seen with Credit Suisse, which in 2023 required a 3-billion-franc rescue from the state.

“The balance between stability and growth is crucial for the future of the Swiss banking system,” said FINMA President Mark Branson. In this context, UBS opposes overly severe regulation, seeking to influence decisions in a way that favors market needs, especially considering the impact on financial services in Lugano and Mendrisio, two key centers for the Ticino economy.

Decisions made by summer will have significant repercussions on the stability of the Swiss financial system and, consequently, on the regional economy of Ticino, where many frontier activities, including trade and tourism, are closely linked to the health of major banks. The new rules will also directly impact municipalities like Lugano and Chiasso, where many companies and professionals operate with international clients, often with financial relationships exceeding 10 million francs.

To address this phase effectively, an operational checklist includes:

• monitoring official communications from the Federal Council;
• assessing how new regulations will impact client portfolios;
• preparing updates to risk management strategies;
• strengthening compliance systems.

In practical terms, a more flexible regulation could enable UBS to increase investments in Ticino development projects, such as ICT infrastructure upgrades in Bellinzona, while a stricter framework might impose restrictions that slow down such initiatives.

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Key points

UBS Construction Site Three Years After Credit Suisse Rescue

For cross-border workers and companies in Ticino, recent developments in the banking sector present a complex challenge but also an opportunity for renewal. The recent completion of UBS’s migration process and the internal restructuring undertaken by the Swiss bank, in response to the financial turbulence of 2023, have led to a reshaping of banking services and investment strategies. These changes directly affect cross-border workers, who must carefully monitor their employment conditions, salaries, and the stability of the local banking system, a pillar of the Ticino economy.

For example, in Lugano, which hosts numerous UBS branches, an estimated 15,000 cross-border workers are employed in banking and finance. With restructuring, some positions have been reorganized or reduced, potentially impacting incomes. Additionally, the possibility of rising intermediary costs or changes in loan conditions, linked to regulatory revisions, must be carefully evaluated. It’s advisable to use tools like salary calculators and tax simulators available on official portals to practically analyze how future regulations, such as the new residence permit law approved in 2022 with costs around 1,000 CHF, could influence income and employment status.

The banking situation in Ticino is evolving rapidly, but collaboration among local institutions, universities like SUPSI and USI, and regulatory bodies helps maintain a stable and predictable framework.

To effectively navigate uncertainties, an operational checklist includes:

• reviewing employment contracts and regulatory updates;
• monitoring official communications from UBS and FINMA;
• comparing investment and mortgage scenarios, considering interest rate increases of about 0.75 percentage points in 2023 compared to the previous year;
• consulting financial analysis portals for real-time updates and comparison tools like tax simulators.

As the political debate on banking and labor regulation reform unfolds this summer, it will be crucial to follow legislative proposals and fiscal changes that could impact about 50,000 cross-border workers and 4,000 regional companies. Practical scenario: a worker earning 70,000 CHF annually, residing in Mendrisotto, might face a 3-4% higher tax rate if new rules increase income taxes on cross-border employment.

To stay informed, it is recommended to follow official sources like the Ticino Cantonal website, UBS communications, and publications from SUPSI and USI, along with regularly using online analysis and comparison tools. Only by doing so can workers and companies adapt quickly to changes and seize new market and investment opportunities.