While the integration of Credit Suisse and UBS is advancing, there are some complications along the way. UBS's plans in China will need to be reworked for regluatory reasons, which could make way for a financial giant from the US.
Rules governing the ownership of mutual fund managers pose a potential problem for UBS post-acquisition. UBS's upcoming takeover of Credit Suisse, means it will likely have to adjust its expansion plans in China’s securities and mutual fund industries, as reported by «Caixin» (behind paywall).
If the combined bank were already a reality today, it would violate Chinese regulations related to the the ownership of securities firms, the report said.
Furthermore, UBS’s plans to put forward an application to set up a wholly owned mutual fund manager will also need to be adjusted to the new situation following the takeover.
In recent years the two Swiss banks have expanded in China, while China has been continuously opening its financial sector.
No Room for Two
Credit Suisse has a 51 percent stake in the brokerage joint venture, Credit Suisse Securities China. Currently it is seeking approval to acquire the remaining shares from its Chinese partner. It gained a majority stake in the joint venture in 2020 and wanted to use it to push into the mass market from Shenzhen.
But seeing as UBS holds 67 percent of Beijing-based UBS Securities Co., this could become problematic. According to the regulations of the China Securities Regulatory Commission (CSRC), a company cannot be a majority shareholder of more than one securities firm.
Potential Problem
Regulations on investment fund manager ownership also pose a potential problem for UBS after the takeover. Credit Suisse also owns 20 percent of investment fund manager ICBC Credit Suisse Asset Management - a joint venture (JV) with state-owned Industrial and Commercial Bank of China (ICBC), the country's largest bank by total assets.
The company is a leading investment fund manager in mainland China. According to ICBC, it managed assets of 1.72 trillion yuan ($247 billion) at the end of 2022. Its management fee revenue ranked among the top 10 mutual fund managers in China this year, it said.
Project Ends
UBS, in turn, holds a 49 percent stake in its own JV in the field. UBS SDIC Fund Management had about 237 billion yuan in assets under management at the end of 2022. In itself, this company does not pose a problem. However, the Swiss bank plans to apply for a license to operate its own mutual fund manager in China, sources told the newspaper.
If the license is granted and UBS goes ahead with the establishment of the company, the bank would have a stake in three investment fund managers in China after acquiring Credit Suisse. This would violate Chinese regulations, which state that a company may generally have a stake in no more than two such institutions. To avoid violating regulations, UBS would most likely have to abandon its plan to apply for its own investment fund license, the report said.
Citigroup Senses Opportunity
Meanwhile, Credit Suisse is close to completing its purchase of the remaining shares in Credit Suisse Securities China. However, it is likely to sell the entire package if the regulator approves the deal, the report said.
The sale would include a license to operate a wholly owned securities firm. Citigroup could be interested, as «Caixin» reports, citing familiar sources. The US financial giant has yet to receive approval for a securities license, which it applied for at the end of 2021.
