On the 20th March 2023 the Digital Zeitgeist published the article regarding Credit Suisse: https://gpm-invest.co.uk/thousands-of-jobs-in-the-city-might-be-lost-as-a-result-of-the-ongoing-crisis-at-credit-suisse-and-ubss-acquisition-of-the-troubled-bank/
Now, read today’s continuing saga from Credit Suisse:
Digital Zeitgeist – Financial Tsunami Hits London UBS’s Credit Suisse Takeover to Axe Tens of Thousands of Jobs
In light of recent events, the consequences of UBS’s acquisition of Credit Suisse have become gravely concerning. As reported earlier, thousands of jobs in London were already at stake due to the crisis at Credit Suisse and its subsequent acquisition by UBS. It is now confirmed that the Swiss investment bank UBS is preparing to cut over half of the 45,000 staff it inherited from Credit Suisse, with the first round of cuts expected to commence shortly. This development is expected to impact between 30,000 and 35,000 employees in three rounds of cuts, with Credit Suisse employees in London bearing the brunt.
Mark Yallop, the former UK CEO of UBS, had previously projected that a number of positions in investment banking, back offices, and technology would be eliminated in London following the acquisition. He stated, “I think it’s inevitable that a merger of this sort will result in some further job losses. I would imagine those would be concentrated in the risky investment banking business at Credit Suisse which is partly the cause of the problems that the firm is experiencing and in middle, back office, technology and operational roles where bringing two firms together will mean you can run one bigger firm without doubling up the infrastructure needed to manage it”. The scale of job losses, as now revealed, is significantly more extensive than anticipated.
The acquisition itself was borne out of necessity, as Credit Suisse faced a severe crisis. UBS reluctantly agreed to buy Credit Suisse in a deal brokered with the Swiss government and local regulators in March after Credit Suisse came close to bankruptcy. The costs of the merger were expected to reach $17bn (£13.4bn), with UBS having inherited a portfolio of assets from Credit Suisse worth $35bn.
Credit Suisse’s shares plummeted almost 62% in Swiss premarket trading when the acquisition was announced. The devaluation was partly attributed to the Swiss regulator’s demand to write down 16 billion Swiss francs worth of the bank’s debt to zero as part of the rescue merger, which further infuriated bondholders.
This series of events has had repercussions beyond Switzerland and the City of London. On the day when the rescue plan was unveiled, the FTSE 100 index fell nearly 2%, with major banks in the UK experiencing sharp declines in share values. Furthermore, central banks worldwide, including the Bank of England, made synchronised announcements about financial actions to stabilise banks, reminiscent of the 2008 financial crisis.
While UBS CEO, Sergio Ermotti, claims that the integration is progressing “very well,” the ramifications of these job cuts will be far-reaching, not only for the employees directly impacted but for the financial sector and the global economy. The City of London, already reeling from staff reductions at Morgan Stanley and Goldman Sachs earlier this year, now faces a further blow.
In conclusion, it is crucial to consider the larger picture. As much as the merger between UBS and Credit Suisse might be portrayed as a necessary measure to prevent a complete collapse of Credit Suisse, it is important to critically analyse the human cost. Tens of thousands of employees, predominantly from Credit Suisse, are facing an uncertain future. The ripple effects on the economy, especially in London, could be significant. The haste and pressure under which this acquisition was made also leave questions about the transparency and due diligence in evaluating the risks involved. Mr. Yallop’s cautious reminder that there could be more lurking risks in Credit Suisse’s balance sheets than are currently known to the public is a significant factor to keep in mind. The financial sector has historically proven to be volatile, and ensuring stability is undoubtedly vital. However, the human element must not be overlooked. The livelihoods of thousands of individuals are at stake, and this serves as a reminder that there should be a balanced approach to handling financial crises that account for both economic stability and human welfare. The coming months will be a critical period in observing how these layoffs are handled and what support systems are put in place for those affected. It is imperative for the financial industry, regulators, and governments to take a holistic approach in dealing with such crises, balancing the urgencies of financial stability with the equally important factor of human impact and welfare.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of GPM-Invest or any other organisations mentioned. The information provided is based on contemporary sourced digital content and does not constitute financial or investment advice. Readers are encouraged to conduct further research and analysis before making any investment decisions.