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UBS Chairman Axel Weber has performed a perfect u-turn with his wish for a mega-merger. His reasons are understandable even as the chances for the plan to make UBS a European champion seem slim.

If you don’t move to align your views to a change in circumstances, your intellect is simply not particularly adaptable. You couldn’t possibly claim that to be true about Axel Weber.

The chairman of UBS aims for a mega-merger between Switzerland’s largest bank and another leading European finance institute, according to a slew of reports in the media in recent days.

Impossible U-Turn

He must have changed his mind about mergers in that case. Five years ago, the 63-year-old thought mergers between major banks to be more or less impossible. Last year, suddenly, Weber had changed tune: Europe needs banking champions of a size that allowed them to compete with the big U.S. rivals.

But, UBS, over which he had presided since 2012, was not part of this process. A mega-merger or acquisition might paralyze the bank for years. «Before we run, we must walk safely,» he told «Tagesanzeiger» in an interview in 2019 (behind paywall).

Now, another about-face: Weber and UBS are in the mood to acquire or merge. His time at the top of UBS will expire in two years’ time.

European Champion – With a Swiss Bank

According to this plan of the ex-head of Germany’s Bundesbank, a Swiss bank would assume the position as European champion. The targets mentioned include Deutsche Bank and Commerzbank in Germany, BNP Paribas in France, Barclays or Lloyds Bank in the U.K. – or will it be Credit Suisse after all?

With the size of these targets the transformation of the former central banker, who has a penchant for thinking big and the long-term, seems complete. During his entire time at the helm of UBS, he had been an ardent supporter of a low-risk strategy for the big bank.

And now, all of a sudden, he wants to take the risks that are inherent in a mega-merger? One is simply left to speculate on the reasons why he has changed his mind so dramatically.

Perspective of a European Banking Union

Maybe, Weber was finally swayed by the advisers who keep coming with visions of something big. UBS has spent billions on lavish platforms, but with the volumes and organic growth it generates, UBS can’t achieve the scales needed all on its own. Perhaps, the medium-term perspectives of UBS are so paltry that it must seek a big move in order not to become insignificant.

Maybe, he also saw the time to be right with Germany’s turn at the helm of the Council having begun in July. Olaf Scholz has moved the European Banking Union to the top of the agenda.

A well-functioning banking union is a prerequisite for consolidation, because it will pave the way with a common set of financial market regulation and rules for the winding up of banks. The irony lies in the fact that it was German banks that so far had opposed a European deposit protection fund. In July, the German Supreme Court however had thrown out an objection to the Banking Union.

Things Have Started Happening