The merger of investment banking franchises UBS and Credit Suisse offers a compelling vision of a global bank with no apparent gaps and impressive combined league-table heft – assuming the deal goes through. But a big if remains.
Among the obstacles cited in an internal UBS review document seen by Reuters, South Korea and India were deemed as having “slow” regulatory approvals. The Swiss banking giant also highlighted Ireland and Saudi Arabia as “slow jurisdictions” in granting licenses, according to the previously unreported document dated Sept. 6 and circulated to UBS (UBSG.S) staff globally. The review, which followed a global study to assess the timeline for securing approvals, warned that uncooperative regulators could jeopardize transactions such as the takeover of Credit Suisse, whose legal completion hinges on clearances in markets where both banks operate.
UBS and Credit Suisse have much to do to make the merger of their businesses in Asia work. The combined group will have a presence in 27 markets, but it will only have a physical footprint in three – South Korea, India, and Hong Kong. And it will have to sell its assets and withdraw from two others – Australia and Singapore.
The rest will have to be merged in some way. The vast majority of the markets where UBS and Credit Suisse operate grant automatic transfer of assets and liabilities, a process known as universal succession. Seven, however, is optional, a requirement that makes the integration much more complicated and time-consuming.
That might be enough hurdle to derail the merger, but it is not the only one. The two banks need help in the area of personnel. In Asia, for example, Credit Suisse has lost several senior investment bankers in recent months. Greater China chief executive Carsten Stoehr and equities co-heads Kuan Ern Tan and Joe Lai are just two names to the left, along with Singapore coverage head Angeline Aw and Frontier Asia CEO Rehan Anwer. Add to that a whole host of other talented people who have already departed, and the question of how many top Credit Suisse investment bankers will still be around when the merger is completed looms large.
Aside from the issue of talent, another problem facing UBS and Credit Suisse is whether they can agree on how to share client data in a way that complies with local laws. The Swiss banking giant has offered to turn over 250 of the 52,000 civil names a judge has ordered it to disclose but has fought hard to set aside her ruling, arguing that divulging so many client details would amount to an unfair breach of privacy. The judge will hear the case in October and is expected to rule on whether or not to drop the proceedings altogether. Neither UBS nor Credit Suisse responded to requests for comment. Representatives for the central banks in South Korea, Ireland, and Saudi Arabia did not immediately respond to a request for comments.