UBS CEO says Credit Suisse will be a case study for big bank mergers

The mammoth integration of failed bank Credit Suisse into its former rival UBS will act as a “case study,” UBS CEO Sergio Ermotti said Friday, one that will show that big bank mergers should be allowed.

“It’s going to be a case study to be evaluated globally, but also particularly in Europe, where eventually the necessity of creating stronger banks, and stronger and more competitive banks from a global standpoint of view, is in my point of view a necessity,” Ermotti told CNBC’s Steve Sedgwick at an event at the Ambrosetti Spring Forum in Italy.

“Of course, we can’t just rely on a crisis to create or facilitate the merger of banks,” Ermotti said.

“It’s good to have strong players that can be part of the solution, like UBS was in the Credit Suisse case. … But it cannot be just that part. So in that sense, I think that the real issue is, there has to be a political desire to facilitate something like that. So it’s not the reality of today,” he added.

Credit Suisse collapsed in March 2023 after years of underperformance, scandals and risk management crises. UBS in June completed its takeover of the 167-year-old bank in a deal controversially brokered by Swiss authorities.

The Swiss National Bank has said the size of the new entity flags potential competition issues that will need to be monitored.

Ermotti said Friday, “The good news is that, in my view, in many countries, there is a recognition that they want to protect their banks or financial institutions as national champions, which is an implied or explicit recognition of their value for their economies.”

“But the bad news is that they don’t realize that in order to really be meaningful, and go to the next level of their contribution in their economies, they will need to be also more competitive globally. But without a banking union, without a capital markets union, it’s going to be very, very difficult for Europe to compete with U.S. large banks.”

Unlike in the U.S., European economies continue to rely on the banking sector for business financing; and Europe has a “completely different playing field and a lack of critical mass,” Ermotti said.

“So I hope, I’m not so convinced it’s going to happen soon, but I hope eventually one day those kinds of mergers between big banks will be allowed and we can contribute to that by showing that it’s possible. In the meantime, I think that in many countries, critical mass and synergies can be created by further rounds of local mergers,” he said.