Switzerland: Problems of the banking center with international significance - a look at UBS and the bank-state nexus

Switzerland: Problems of the banking center with international significance - a look at UBS and the bank-state nexus

According to a report from www.nzz.ch, Switzerland is in a delicate situation regarding its banking center. After the collapse of Credit Suisse, UBS is the only globally active bank in the country. The parliamentary commission of inquiry is looking into the collapse of Credit Suisse, while regulators are grappling with the new reality in the banking industry. The question is how to deal with such a large bank, which could influence the fate of Switzerland.

According to the Financial Stability Report of the Swiss National Bank (SNB), the banking sector's consolidated assets are 3,600 billion francs, or 470 percent of GDP. UBS and CS have an economic weight that surpasses other systemically important banks in Europe or the USA. A banking sector that is too large can put a strain on the economy. This is reflected in excessive currency appreciation, excessive bank wages, lack of diversification and the risk of “too big to fail”.

The financial sector was directly responsible for 7.6 percent of tax revenue in Switzerland in 2022 and can support Swiss companies with foreign business. However, it is necessary to define a critical turning point at which the disadvantages of an overly large banking sector outweigh the advantages. Given this information and the associated risks, it is necessary to take measures to regulate and stabilize the Swiss banking sector.

It is important to define an appropriate size for the banking sector in order to minimize economic risks while reaping the benefits of a well-functioning financial sector. Regulators should take the necessary steps to create balance and ensure the stability of the Swiss financial system.