Following in the footsteps of those in the know, Swiss millionaires are now joining in the lamentations about the reputation of the financial industry. Preventing the proud banking nation from going downhill is becoming a Herculean task.

Almost like a prayer litany, officials emphasize at every opportunity the marriage of convenience between UBS and Credit Suisse was the only way to avert an international financial crisis. Thanks to their rapid intervention, it was possible to limit the damage to the Swiss financial industry.

Whether this optimistic assessment, in which the participants like to pat themselves on the back, is accurate is being closely scrutinized by the parliamentary commission of inquiry that has since been established. In all likelihood, its investigations will take more than a year to shed light on what transpired, which is as serious as it is inglorious for the financial industry and Switzerland.

A Clear Verdict From Business

Many Swiss business leaders have already made up their minds.

One hears time and again behind closed doors, the debacle surrounding Credit Suisse, and not least the emergency rescue with the help of government intervention using emergency law, has brought the Swiss financial center into disrepute.

String of Failures

The list of disregarded safeguards in the largest European bank merger since the financial crisis is long. There was no comprehensive due diligence, no cooling-off period, no antitrust review, and no shareholder vote.

That this has damaged investor confidence and ultimately Switzerland's reputation is undisputed.

No Win for Private Banks

The tarnished image of Switzerland, otherwise so committed to stability and the rule of law, is clearly visible among private banks, which peddle the «Swiss banking» brand in particular.

The withdrawals of client funds from Swiss private banks measured by the consulting firm KPMG speak pretty clear language. The conclusion is obvious the handling of the Credit Suisse affair has spread further afield and is causing furrowed brows abroad.

How long the loss of confidence in the Swiss industry center will last is uncertain. According to KPMG analysts, a large proportion of Swiss private banking clients are still prepared to pay a premium for customer-oriented and reliable banking services in a highly competitive Swiss financial industry.

Balanced Picture Among Millionaires

Another piece of the mosaic for the damaged reputation is provided by a survey of Swiss millionaires who are welcome clients of Swiss banks.

In the 2023 Swiss HNWI Monitor conducted by the consulting firm Kunz & Huber, assessments from 400 respondents on the effects of the Credit Suisse takeover by UBS are more or less balanced.

Multiple Failures

Older, loyal investors and UBS clients, however, view the takeover somewhat more positively than clients with somewhat less financial knowledge who are willing to switch.

The millionaires, on the other hand, give clear marks to the various actors in the drama surrounding the rescue. According to the survey, UBS management, the Swiss National Bank (SNB), and the Federal Council acted competently.

In contrast, Credit Suisse management, the Swiss Financial Market Supervisory Authority (Finma), and the Swiss Bankers Association are seen as not playing their roles well.

Permanent Setback

Respondents expect the winners of the fundamental reorganization of the Swiss banking landscape in three to five years' time will be UBS, its shareholders, and the cantonal and regional banks.

In contrast, the millionaire class believes Credit Suisse shareholders will be left empty-handed, putting the local labor market and the Swiss financial industry in the loser bracket.

Safe Haven in Peril

If the millionaires surveyed are right, competing wealth centers like Singapore will undoubtedly capitalize on the Swiss plight and try to overtake it as the leading offshore financial center sooner than they would like.

But things could get even worse if the aftermath of the bailout. Not only if the country's historical reputation as a safe haven suffers permanent damage, but the newly emerging banking giant that is UBS, now roughly twice the size of Switzerland's annual GDP, also gets into trouble. Like any complex transaction, the largest European bank merger since the 2008 financial crisis is an undertaking with an uncertain outcome.

A Herculean task awaits the Swiss financial industry.