GENEVA — The UBS takeover of embattled rival Credit Suisse has shaken Switzerland’s self-image and dented its reputation as a global financial center, analysts say, warning that the country’s prosperity could grow too dependent on a single banking behemoth.
The uncertain future of a union of Switzerland’s two global banks comes at a thorny time for Swiss identity, built nearly as much on a self-image of finesse in finance as on know-how with chocolate, watchmaking and cheese.
Regulators who helped orchestrate the $3.25 billion deal have a lot on their plates as UBS checks the books of its rival, cherry-picks the parts it wants and dispenses with the rest.
“The real question is what’s going to happen, because we’ll now have a mastodon — a monster — that will be increasingly too big to fail,” said Marc Chesney, a finance professor at the University of Zurich. “The danger is that over time, it will take more risks knowing that it is too big for the Swiss state to abandon it.”
After studying the numbers, he said, the total value of exotic securities — like options or future contracts — held by the merged bank could be worth 40 times Switzerland’s economic output.
“Over time, UBS will control the Swiss state, rather than the other way around,” Chesney said.
The neutral, prosperous country of about 8.5 million people enjoys the highest gross domestic product per capita of any country its size. Switzerland’s relatively low-tax and pro-privacy environment draws well-heeled expats, and it regularly ranks among the most innovative countries. Over generations, it has become a global hub for wealth management, private banking and commodities trading.
That climate also has bred a reputation as a secret haven of billions in ill-gotten or laundered money, with the Tax Justice Network ranking Switzerland second only to the U.S. in financial secrecy.
That was on display this week when a U.S. Senate committee’s two-year investigation found that Credit Suisse violated a plea agreement with U.S. authorities by failing to report secret offshore accounts that wealthy Americans used to avoid paying taxes.
Such turmoil at the Switzerland’s second-largest bank, which also includes hedge fund losses and fines for failing to prevent money laundering by a Bulgarian cocaine ring, made it vulnerable as U.S. bank collapses stirred market upheaval this month.
Now, many conservatives are reviving their calls for Switzerland to turn inward.
Christoph Blocher, a…
Click Here to Read the Full Original Article at ABC News: Business…