Sabine Keller-Busse needed just one word to describe the current state of corporate banking in the Swiss financial sector: «Extreme.» She made this statement in an interview with the «NZZ» this week.

According to UBS's Switzerland Chief, this situation has been ongoing since Credit Suisse (CS) started faltering. Keller-Busse describes an aggressive climate: «…the competition doesn't just come from foreign banks. It is suggested that UBS no longer has time to look after its customers.»

UBS's Rallying Slogans

At the newly single Swiss major bank, they are trying to counteract this. Among other strategies, they are using rallying cries: «Stay with the customers.»

Despite UBS's efforts to attract corporate clients, its hands are somewhat tied. While it is a universal bank in Switzerland, globally, its focus is on wealth management because UBS sees its largest revenue sources there. This also shapes external perceptions.

UBS is urgently dependent on inflows of new money, especially against the backdrop of increasingly stringent demands from the Federal Department of Finance, the Financial Market Supervisory Authority, and the Swiss National Bank (SNB) regarding equity capital.

German and French Banks push ahead Advance

Additionally, UBS's efforts to retain corporate clients have their limits; even before the crisis, many companies were already operating on a dual track, i.e. they never conducted their business through a single financial institution. This is called risk minimization through diversification. The collapse of CS, even though it did not lead to a complete shutdown of operations, demonstrates that this approach pays off.

It is not so much the cantonal banks but foreign banks that are taking advantage of this situation. Among smaller and medium-sized enterprises (SMEs), it is primarily the two German institutions Commerzbank and Deutsche Bank that are aiming to secure a large share, along with Société Générale and BNP Paribas, two French entities that have long been present in Switzerland.

In the large corporate sector, the business is increasingly dominated by the Americans: Notably, J.P. Morgan and Goldman Sachs are actively involved here, according to reports from financial circles. Deutsche Bank, leveraging its global network, is also a significant player in this sphere.

Cantonal Banks Retreated – For Good Reason

It remains unclear which institution will be the beneficiary of the new market situation and how much of the market share taken over from CS will remain with UBS. This is yet to be seen.

The answer will largely depend on the role the cantonal banks will play in the future. Due to their state guarantees, they hold a macroeconomic responsibility. However, recently, they have been retreating—for good reason.

What Will Ultimately Be Decisive

Corporate banking is fraught with risks, as demonstrated by the Signa case. The fiasco of the struggling Austrian real estate entrepreneur René Benko also proved costly for numerous Swiss (state) institutions, such as the Obwalden, Aargau, and Graubünden Cantonal Banks, or Migros Bank.

It would be desirable for some of them to retrieve their courage. From the companies' perspective, it is undoubtedly positive when foreign providers ensure more choice and better credit conditions. Moreover foreign banks are often active in Switzerland, ensuring that at least some of the value creation remains within the country.

However, Swiss institutions possess intimate knowledge of local conditions and needs, which should enable them to leverage this advantage in the corporate banking sector as well.