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Current Economic Conditions, February 2009 Federal Reserve Bank of San Francisco 50 pages...
...Swiss banking giant UBS takes its name from the first initials of the company's original moniker Union Bank of Switzerland. But over the past few months the Swiss have begun to joke that the acronym should stand for United Bandits of Switzerland. Fury over a tax scandal and massive losses thanks to UBS's exposure to the toxic subprime market in the U.S. is growing fast. "Those arrogant and greedy bankers are tarnishing our image," says Marie-Claire Favre between sips of her cappuccino in a Lausanne cafe. Standing in front of UBS's Lausanne office, Bernard Thevenoz...
...Banks are the backbone of Switzerland's economy, accounting for 12% of national GDP, and for decades they have been central to the Swiss view of themselves. But the past few months have not been good for the industry, and in particular UBS, which has been under a cloud since last summer. That was when news broke that U.S. authorities were investigating the world's largest manager of private wealth for its role in helping rich Americans hide $200 billion in undisclosed offshore accounts to avoid taxes. Last month UBS agreed to pay the U.S. a $780 million penalty...
Financial analysts say those strong feelings are beginning to translate into financial decision making. The number of UBS customers closing their accounts is on the rise. Panagiotis Spiliopoulos, head of investment banking research at Switzerland's Vontobel bank, estimates that $15-20 billion in domestic funds were moved from UBS to smaller banks in recent months. In normal times, one bank expert says, withdrawals would be next to nothing. "We are fed up because UBS has betrayed all the values that make us uniquely Swiss: fiscal responsibility, stability and international credibility," says Samuel Bretholz, a Geneva sociology student...
Credit Suisse, Switzerland's second largest bank, posted a $7 billion loss in 2008 and slashed thousands of jobs. But so far it has not suffered from the loss of client confidence that UBS faces. The biggest winners are small banks because "they keep their noses clean and stay out of the United States," Bretholz says. "The Swiss want their money to be safe, and they can no longer find security in big banks that operate internationally and are exposed to global risks...