Analysis of the Competitive Implications of the Merger of Credit Suisse and UBS

«A zombie is gone, but a monster arises.»
This was the drastic comparison made by the Neue Zürcher Zeitung in connection with the merger of UBS and Credit Suisse. The press conference on March 19, 2023 did indeed shake up the national and international financial sector. In future, Switzerland will only have one big bank - and a real colossus at that. The merger strengthens the market power of a single market player, and if this is shaken, the risks could be enormous.

This bachelor thesis analyzes this significant merger of Credit Suisse and UBS, two of the largest banking institutions in Switzerland, and its impact on market dynamics and the regulatory framework. The focus is particularly on the increased market power of the newly formed colossus and its potential impact on competition in the Swiss banking sector. Concerns are namely raised about its impact on market conditions and competition.

Various measures such as the Lerner Index and the Herfindahl-Hirschmann Index have been used to measure post-merger, which in theory is an acquisition, market concentration. These indices suggest that UBS now has greater market power, which could lead to less competitive pressure and higher prices within the sector.
The merger has caused regulators to reconsider the existing framework for systemically important banks. Adjustments may be needed to mitigate the risks associated with the “too big to fail” scenario and to ensure that financial stability is not compromised by the size of the merged entity.

In view of the greater market power, the regulatory authorities are recommended to introduce stricter supervisory mechanisms to ensure that the merged company does not abuse its dominant market position. It is essential that policymakers review and possibly revise the regulatory framework to better manage the risks associated with large-scale mergers in the banking sector. UBS should maintain transparent communication with all stakeholders in order to manage the changes effectively and mitigate any negative impact on clients and employees.

The merger of Credit Suisse and UBS is a major event in the Swiss financial landscape with significant implications for competition and regulatory practice. It is crucial that this event is handled with a careful balance between exploiting synergies and protecting the competitive integrity of the Swiss banking sector.