The merger of 8 December 1997

The announcement

On Monday, 8 December 1997, the Union Bank of Switzerland and the Swiss Bank Corporation announced that they would merge. The combined bank was to be called UBS. It was presented as the largest bank in the world by capital and the second largest by total assets. The transaction required the approval of the shareholders in 1998 and clearance by the Swiss Competition Commission, the European Union and the authorities of the United States. The banks announced that about 13,000 of their 58,000 jobs would be eliminated, 7,000 of them among the 38,000 jobs in Switzerland. Under the terms of the merger the shareholders of the Bankgesellschaft were to receive 60 per cent and those of the Bankverein 40 per cent of the new company. The market capitalisation of the combined bank was estimated at CHF 85 billion.¹

The distribution of the top positions told a different story from the distribution of the shares. Mathis Cabiallavetta of the Bankgesellschaft became chairman, while Marcel Ospel of the Bankverein became chief executive. The chairman of the Bankverein, Georges Blum, and its chief financial officer, Peter Wuffli, belonged to the team that negotiated the deal. Robert Studer, the chairman of the Bankgesellschaft who had fought Ebner, left the bank.² The new bank adopted the three keys that the Bankverein had used as its symbol since 1938. The name of the larger partner and the logo of the smaller one became the visible compromise of the new institution. Below the level of names and logos the balance was clear. According to Bilanz, the representatives of the Bankverein dominated the upper levels of management, so that its culture prevailed: Anglo-Saxon, informal and less attached to seniority, as opposed to the stability-oriented, Swiss-rooted and hierarchical culture of the Bankgesellschaft.³

The rationale and the targets

The management justified the merger with the globalisation and deregulation of financial markets, which in its view required greater scale to compete with the American banks. The two partners had complementary strengths and weaknesses. The Bankverein was strong in Anglo-American investment banking but thin in capital. The Bankgesellschaft had the opposite profile, with a strong capital base and a weaker investment banking business.⁴ The merger combined the capital of the one with the investment banking platform of the other. It also allowed the elimination of duplicated branches in Switzerland, where both banks had built dense networks. Some 550 branch locations were to be consolidated.

The targets were ambitious. Four years after the merger the bank was to earn a consolidated net profit of CHF 10 to 11 billion and a return on equity of 15 to 20 per cent. It was to manage client assets of CHF 1.32 trillion, which would make it the largest wealth manager in the world. Restructuring costs were estimated at CHF 7 billion and lasting cost savings at CHF 3 to 4 billion a year. Of the 7,000 jobs to be cut in Switzerland, about 1,800 were expected to lead to actual dismissals after natural attrition.⁵ These figures illustrate the new vocabulary of Swiss banking. A merger was no longer justified primarily by the needs of Swiss industry or the security of Swiss savers. Its benchmarks were return on equity, market capitalisation and a place in the global league tables.

Regulatory approvals and completion

The merger was the first great test of the new Swiss competition law in banking. The Competition Commission examined the effects of the combination on the domestic market, where the new bank would hold a leading position in retail and commercial lending. It approved the transaction subject to conditions designed to preserve competition, including the sale of a number of branches.⁶ On 8 June 1998 the Board of Governors of the Federal Reserve System approved the formation of UBS AG, with seats in Zurich and Basel, as a bank holding company in the United States. The Federal Reserve recorded that at the end of 1997 the Union Bank of Switzerland had consolidated assets of about USD 401 billion and was the seventeenth largest banking organisation in the world. The Swiss Bank Corporation, with assets of about USD 305 billion, ranked twenty-seventh. The combined bank would become the second largest banking organisation in the world. The merger was completed in June 1998.⁷

Reactions in Zurich, Basel and Bern

The public reaction in Switzerland was mixed. The merger was widely accepted as necessary for global competitiveness, but the trade unions and the left protested against the job losses. The Social Democratic Party and the Swiss Federation of Trade Unions organised protest rallies that mobilised about 1,000 people. In the December session of 1997 the Social Democrats submitted nine parliamentary questions on the social costs of the merger and on the tax revenue that would be lost. The canton of Basel-Stadt expressed concern about the fiscal effects of a shift of the headquarters to Zurich. Federal Councillor Jean-Pascal Delamuraz, head of the Federal Department of Economic Affairs, stressed that the review of the merger was governed by competition law and could not take account of social considerations.⁸

For Basel, the merger was a turning point. The Bankverein had been the city’s flagship financial institution for more than a century. Silas Gusset reports that Ospel is said to have threatened to resign if the board did not approve the merger. He also observes that Basel lost its position as a financial centre as the importance of the institution in the city declined after the merger.⁹ The dual seat of UBS AG in Zurich and Basel preserved a legal and symbolic link with the Rhine city, but the centre of gravity of the bank was the Bahnhofstrasse and the Paradeplatz. For Zurich the merger meant that both global Swiss banks now had their operational headquarters within a few hundred metres of each other. The concentration of Swiss big banking in one square of one city had become almost complete.

Notes

1. Année politique suisse / Politchronik, “United Bank of Switzerland (UBS)”, entries for December 1997, https://politchronik.swiss/de/prozesse/14606-united-bank-of-switzerland-ubs; finews.ch, “UBS vor 20 Jahren: Startschuss zu einer riskanten Fusion”, https://www.finews.ch/news/banken/29895-schweizerische-bankgesellschaft-schweizerische-bankverein-sbg-sbv-marcel-ospel-fusion. ↩
2. finews.com, “UBS 20 Years Ago: A Risky Intention”, https://www.finews.com/news/english-news/29894-ubs-swiss-bank-corporation-merger-1998-robert-vogler; The Spokesman-Review (Associated Press), “Swiss Banks Announce Merger”, 9 December 1997, https://www.spokesman.com/stories/1997/dec/09/swiss-banks-announce-merger/. ↩
3. UBS, “160 years of UBS”, Annual Review 2021, https://www.ubs.com/global/en/our-firm/annual-review-2021/inspire/articles/160-years-of-ubs.html; Bilanz, “Wie vor 20 Jahren aus SBG und SBV die Grossbank UBS entstand”, https://www.bilanz.ch/geld/wie-aus-zwei-bankkulturen-die-grossbank-ubs-entstand. ↩
4. finews.ch, “UBS vor 20 Jahren”, as cited above; SWI swissinfo.ch, “Zusammenschluss vor 20 Jahren schuf eine neue Schweizer Grossbank”, 2017, https://www.swissinfo.ch/ger/zusammenschluss-vor-20-jahren-schuf-eine-neue-schweizer-grossbank/43739032. ↩
5. finews.ch, “UBS vor 20 Jahren”, as cited above. ↩
6. finews.ch, “CS-Integration: Entscheid könnte für Finma zum Eigengoal werden”, 20 June 2024, https://www.finews.ch/news/banken/63128-ubs-cs-integration-finma-weko-auflagen-wettbewerb. The article recalls that the Competition Commission required the sale of bank branches and subsidiaries and that UBS had to divest 26 branches, 18 of them in regions regarded as sensitive for competition. The decision itself is published in Recht und Politik des Wettbewerbs (RPW) 1998. ↩
7. Board of Governors of the Federal Reserve System, press release and order of 8 June 1998 concerning UBS AG, Union Bank of Switzerland and Swiss Bank Corporation, https://www.federalreserve.gov/boarddocs/press/bhc/1998/19980608/19980608.pdf; Wikipedia, “UBS”, https://en.wikipedia.org/wiki/UBS (completion date). ↩
8. Année politique suisse / Politchronik, “United Bank of Switzerland (UBS)”, as cited above. ↩
9. Silas Gusset, “Eine Fusion mit Zwischentönen – bis heute”, as cited above. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.