Politicians have for months been calling for UBS to spin off Credit Suisse's Swiss business. UBS considered but ultimately rejected the option.

The voices at UBS calling for an integration of Credit Suisse's Swiss business seem to have won out, meaning the Credit Suisse name will disappear, but many Swiss politicians still favor retaining the business and brand, according to an article in the «NZZ am Sonntag» (in German, behind paywall) over the weekend.

Thierry Burkart, a member of the Free Democratic Party (FDP) and a councilor of state, said a spin-off is the preferred option since it would reduce risks while preserving Swiss jobs and promoting competition in the banking industry. Failing that, he expects increased regulatory pressure.

Last week reports emerged that UBS will implement three rounds of job cuts starting this month which are expected to result in the loss of 35,000 jobs from a workforce of about 120,000 at the combined entity. 

Financial Supervision Criticized

National Councilor Samuel Bendahan of the Social Democratic Party (SP) said that if only one major bank remains, the need for stronger regulation increases. Moreover, «A monopoly position for UBS would be a big problem for very many Swiss companies.»

He further argues that UBS was only able to take over Credit Suisse thanks to guarantees from the federal government. «Imagine now that the Confederation has to step in again with billions at a later date because of the guarantees it has given. That would be a huge scandal.»

To be sure, the Swiss National Bank, the federal government, and the financial regulator forced UBS to take over Credit Suisse. Still, UBS is free to decide on its own what path it wants to pursue with Credit Suisse.  

Spinoff not Necessary

In the view of some, a spinoff isn't something necessary for the takeover to succeed. But that doesn't mean that UBS is completely off the hook in such a scenario. 

For Juerg Grossen, president of the Green Liberal party, Finma must keep a close eye on the market. «If a monopoly situation arises because of the merger, then the regulator must intervene,» he says.