UBS established itself as Switzerland’s only global banking powerhouse after buying its rival Credit Suisse in 2023.

UBS, a global player, offers a full range of financial services including wealth management, asset management, investment and retail banking for private and corporate clients. Its balance sheet is twice the annual economic output of Switzerland.

According to the Swiss Bankers Association (SBA), size meets strength when it comes to competing with other large banks around the world. The SBA emphasizes that at least one large international bank is necessary for Switzerland to retain its status as an international financial center.

However, concerns about the risks associated with the size of UBS have been raised by various politicians, including Peter Hegglin of the Center Party. Hegglin notes that if UBS were to collapse, the United States, due to its economic strength, would be better able to cope with the consequences, while Europe and Switzerland would face more serious problems.

A bank catering to multinational corporations

Supporters of a large Swiss bank with a global presence argue that it could improve services for multinationals and local exporters. Swissmem, a manufacturing industry lobby group, argues that having a bank that can manage international transactions, provide credit, hedge currency risks and facilitate access to capital markets simplifies operations.

In its press statement, Swissmem emphasizes the importance of a common culture and language, stressing the need for companies to rely on the bank’s support, especially in difficult times. In addition, Swissmem emphasizes that Swiss companies have felt abandoned by foreign banks that left the country en masse after the financial crisis: between 2008 and 2022, the number of foreign banks in Switzerland fell by more than half.

Roche, a major player in the Swiss pharmaceutical sector, also favors the presence of a large bank. The company is confident that a Swiss bank plays a crucial role in facilitating transactions using Swiss francs, both commercially and financially.

The golden age of the Swiss banking sector

Switzerland has spent generations building a strong financial sector that far exceeds the country’s economic weight. Although private banks emerged 250 years ago, it was the impact of two world wars in the 20th century that propelled the Swiss financial center onto the world stage.

“After the Second World War, Switzerland experienced a significant influx of capital. This period marked a significant development of the Swiss financial sector,” explains economist Rebecca Stewart from the University of Neuch√Ętel. “Many people sought to keep their assets abroad due to security concerns in their home countries, finding refuge in the political and economic stability of Switzerland.”

“Given the significant number of foreign clients, Swiss banks decided to improve their asset management and service delivery by opening foreign branches rather than relying only on intermediary banks in other countries,” she elaborates.

In the first period after World War II, Swiss banks were characterized by prosperity, rapid expansion and significant profits. However, this period of growth was short-lived.

The arrival of competition

Competition on the global financial scene intensified in the 1980s when the U.S. and UK deregulated banking, allowing the emergence of large banks offering both commercial and investment services under one roof.

The easing of Cold War tensions in the early 1990s also reduced Switzerland’s appeal as a neutral haven from geopolitical uncertainty and potential conflict, according to financial historian Tobias Straumann.

“The heyday has passed,” he remarked in an interview with Handelszeitung, pointing to the weakening of Swiss banking secrecy due to U.S. pressure.

Nevertheless, Switzerland retains its status as a leading destination for private banking globally, despite growing competition from other jurisdictions. UBS, which manages CHF 3.8 trillion in assets, is the epitome of Swiss wealth management and aims to increase its clients’ assets to 5 trillion.

Preserve the country’s financial sovereignty

The Swiss Bankers Association (SBA) and some politicians argue that only a large Swiss bank that combines wealth management and investment banking can effectively compete in the global marketplace with giants such as JP Morgan, HSBC and BNP Paribas.

This view goes beyond mere prestige. It emphasizes the need for Switzerland to maintain its financial sovereignty in an uncertain world fraught with geopolitical risks.

“In order not to be dependent on the Americans or the British, Switzerland needs a bank that operates globally,” said Josef Ackermann, a prominent Swiss financial figure who began his career at Credit Suisse and later headed Deutsche Bank.

But economist Rebecca Stewart argues that such a view underestimates the risks of a single international bank operating in a small economy with no other domestic competitors. “Relying on financial sovereignty alone seems naive,” she argues. “Does Switzerland really need a large global bank covering wealth management and investment banking? It might be wiser to reduce risks by separating these activities into separate units.”

Contrary to fears, UBS chairman Colm Kelleher does not see the size of his bank as problematic. In a March 2024 interview with NZZ am Sonntag, he emphasized that a bank’s risk-taking practices matter more than the size of its balance sheet.

He emphasized that UBS focuses on wealth management rather than the risky investment banking preferred by Credit Suisse: “The size issue remains hypothetical as long as UBS maintains its current model.”