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Switzerland’s financial supervisor, FINMA, has been closely examining how UBS vets high-risk wealthy clients from Credit Suisse as part of its hands-on approach to the bank’s integration of its former rival.
Earlier this year, FINMA reviewed the filters UBS uses to screen Credit Suisse wealth management customers. This review ensures that Switzerland’s banking giant does not inherit problematic clients. The filtering technology is designed to identify potential issues related to clients as part of their compliance and anti-money laundering (AML) rules, mitigating risks such as money laundering.
The Swiss financial regulator engaged in detailed discussions with UBS over these filters and the Know Your Client (KYC) procedures, a set of protocols banks use to verify customer identity and information. FINMA also reviewed how UBS assigns risk ratings, ranging from high to low, to prospective clients, according to sources.
UBS has announced that it will first absorb wealthy customers in Singapore and Hong Kong, aiming to complete this transfer by the end of the year, with plans to move clients in Switzerland by 2025.
AML Intelligence could not confirm whether FINMA requested UBS to implement any specific measures following its reviews. However, sources indicated that FINMA might conduct further reviews as UBS, currently valued at $105 billion on the market, progresses with integrating Credit Suisse clients into its platforms.
Responding to inquiries about FINMA’s involvement, a UBS spokesperson stated, “As it prepares for the transition of Credit Suisse clients onto its platforms, UBS upholds the stringent client due diligence procedures it already had in place prior to the acquisition. The client review is based on UBS’s longstanding procedures, which are in line with regulatory requirements.”
FINMA’s detailed review of UBS’s client vetting underscores the regulator’s intent to closely monitor the bank's integration of its former competitor. This merger is the largest banking consolidation since the 2008 global financial crisis.
The financial watchdog faced significant criticism in Switzerland for its handling of Credit Suisse’s collapse in March 2023. Stefan Walter, who became FINMA’s CEO in April, has since called for enhanced regulatory power to oversee banks.
The scrutiny also highlights the operational challenges for UBS, led by CEO Sergio Ermotti, as it navigates a complex integration phase. Around 2,000 employees are dedicated to integrating hundreds of thousands of clients, aiming to achieve $13 billion in cost savings by the end of 2026.
Addressing questions about FINMA’s review of UBS’s integration of Credit Suisse, the regulator stated that the merger is a top supervisory concern and that it is closely monitoring developments related to both financial and non-financial risks. FINMA has expanded its supervisory team and is utilizing all available tools, including on-site inspections.
FINMA has sought to be closely involved in the integration process from the start, aiming to safeguard Switzerland’s financial stability following the takeover. This merger has created a financial entity with assets nearly twice the size of the Swiss economy.
Global wealth management is UBS’s flagship business, comprising more than half of the group’s total revenue of $40.8 billion in 2023. The bank aims to manage over $5 trillion in assets by 2028.
In a speech in Lucerne in May, Ermotti emphasized that risk management is “one of the most important parts of our work and culture.”
Since the emergency takeover of Credit Suisse in March 2023, UBS shares have risen about 57%, outperforming the STOXX Europe 600 Banks index, which increased by 44%. However, investor focus has now shifted to the complex task of onboarding clients and addressing Swiss government requests for additional capital.
Andreas Venditti, a financial analyst at asset manager Vontobel, described the integration as “a Herculean task, a massive job.”
UBS Chief Financial Officer Todd Tuckner noted in May that a significant portion of the expected cost savings would materialize in early 2025 when clients transition to UBS platforms and Credit Suisse infrastructures are decommissioned. UBS’s gross cost savings reached $5 billion by the end of March 2024.
Under Walter’s leadership, FINMA has increased its team, adding about 60 staff members for UBS supervision, with a core team of 22 people exclusively monitoring the bank. “Our task is to identify risks and be proactive to remediate problems,” Walter stated in a May speech. “We will do this even more deliberately in future.”
By fLEXI tEAM
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