UBS and Credit Susse dominate SFMS

UBS (NYSE:UBS) and Credit Suisse (NYSE:CSR) on Wednesday underlined their dominance of Switzerland's new securities trading, clearing and payments company through an almost one-third stake in the group's capital.

The two banks will also have the strongest boardroom representation, nominating two of the 10 directors of Swiss Financial Market Services, the name for the new holding group, to be launched early next year.

However, the price for winning other shareholders' acceptance for the integration of the SWX Swiss Exchange, SIS clearing company and Telekurs financial data and payments group has come via cast iron guarantees for smaller bank shareholders.

The 10-member board, to be headed by Peter Gomez, SWX chairman, is weighted in favour of Switzerland's independent private banks, which have also won the right to appoint two directors. The double representation, in the persons of the chief executive of Vontobel and partner of Pictet, comes in spite of the fact that such banks control only 10.5 per cent of the shares, compared with UBS's and Credit Suisse's combined 31.1 per cent.

Moreover, the new 20-year shareholder pact envisages a total freeze on share transfers in the first five years, preventing accumulation by the two big banks in the case of takeovers. The pact also stipulates any share exchanges after year five can only occur subject to unanimity. Foreign banks will have 19.3 per cent, making them the third biggest shareholding group and illustrating the importance of non-Swiss institutions in the country's financial landscape.

Mr Gomez stressed SFMS had been devised as a member-focused company, with statutes forbidding the sale of shares to non-participants and profits being distributed as dividends.

He argued that the new structure, under periodic debate for the past 15 years, would streamline operations and cut costs, helping Switzerland to remain competitive at a time of change in securities trading.

Mr Gomez made clear the new group intended to remain independent of bourse consolidation elsewhere and saw itself as integral to Switzerland's attempts to remain a main financial centre. In a news conference Thursday, the new organisation will join banking, insurance and fund management lobbies to call for tax and regulatory reforms to improve Switzerland's competitiveness.

Mr Gomez underlined the new holding company's readiness to embark on one-off co-operative ventures, whether with neighbouring Deutsche Börse, with which it is already linked in the Eurex derivatives exchange, or others,

But he spared no criticism for what he called the "stupidity" of German banks in allowing the demutualisation of the German market. That had opened the door to short-term hedge fund investors, to the potential detriment of the country's longer-term status as a financial centre.
Source:ft.com