Acquisition of Existing Swiss Banks
“buy vs. make”
ECONOMICAL CONSIDERATION AND CONSTRAINTS
This is due to the fact that these banks not showing sustainably profitable business
prospects, and in particular suffering from:
- Legal liabilities
- outdated IT systems (mainly core banking system and CRM) which limits offering many critical functions and creates unnecessary high operational cost.
- Outdated business model, not yielding profit sufficient to invest in restructuring points 1 and 2.
Accordingly, dozens of banks are currently up for sale – some banks would even be available
free of charge, for example because of legal issues or non-profibility.
Given that the IT requirements as well as opportunities resulting from new technologies
and systems have increased rapidly in the last few years, it seems very doubtful
(in addition to the other points described above) that the acquisition of an
existing bank is economical, should not other reasons be in favor of such acquisition.
REGULATORY CHALLENGES OFTEN IGNORED
In the case of a purchase, the following prerequisites must also be met,
which are often not assessed correctly early in their dynamics and
influence on costs and time requirements:
Each banking license granted by FINMA is based on a precise business model
and the corresponding services, products and business areas, as well as the
deriving organizational chart and internal rules & regulations.
In the event of a change in the controlling shareholding, FINMA assumes that at
least one of the essential foundations of the license will be eliminated or altered.
In addition, FINMA takes such a transfer of ownership as an opportunity to examine
whether the internal rules & regulations are fully up to date with the latest requirements
(Basel, FATCA, etc.) and coherent, which may not be the case.
Rebuilding the internal rules & regulations based on an updated set is often more efficient
than upgrading an old version. In short: In terms of content and in part formally, the buyer
will have to submit to FINMA what is in total equivalent to a new application.
CORRECT PROCEDURE TO ACQUIRE AN EXISTING SWISS BANK
Whether the new Shareholder and the Business Model he is considering meet all Requirements
and may therefore at all be approved by FINMA should be clarified prior to the purchase
negotiations that FINMA would also agree to sale and, secondly, that it can only so be
reliably estimated whether the target can even meet the requirements of the buyer.
There are currently a large number of banks for sale – most of them are doomed due
to their weak competitive position.
A purchase is possible and not too complicated, but essential rules of the game
are critical to be understood and addressed early in the procedure.
Given the current “pre-license” market valuating of “crypto-enabled” bank projects,
it appears to be a highly profitable project to create such a new Swiss bank.
Based on our many years of experience, creating a new bank, instead of
acquiring an existing one is usually:
- more Efficient
- Less Complex
OF THE 250 EXISTING SWISS BANKS ABOUT 80 WILL CEASE TO EXIST IN THE NEXT 3-6 YEARS
(source: Lloyd’s industry experts).