UBS–Credit Suisse Merger Continues to Raise Funding Costs Across Swiss Banking Sector

When UBS absorbed Credit Suisse in March 2023, the historic state-engineered rescue was framed as the only viable path to prevent a broader banking crisis. More than two years later, the Swiss National Bank (SNB) says the aftershocks are still rippling through the country’s financial system — and they are being felt most acutely in the cost of bank funding.

Speaking at an event in Geneva on Thursday, SNB Governing Board member Petra Tschudin said Swiss banks are now paying “significantly more” to secure liquidity in both bond markets and the money market than they did before the Credit Suisse collapse. The increases occurred mainly between mid-2023 and the end of 2024, with costs easing slightly since but still sitting well above pre-rescue levels.

The analysis underscores how a merger designed to stabilize Switzerland’s financial system has — paradoxically — reshaped funding dynamics in ways that have made credit more expensive and competition for liquidity more intense. For a country long viewed as one of the world’s most reliable banking hubs, the shift marks a rare departure from stability.

A Customer Migration That Reshaped Market Demand

According to the SNB, one of the biggest drivers of elevated funding costs has been the behavioral shift among corporate and wealthy clients following the collapse of Credit Suisse.

Before 2023, many customers held relationships with both UBS and Credit Suisse — a natural diversification strategy in a country dominated by two global banks. Once those clients were forced under a single institutional roof, they sought out new relationships to avoid concentrated exposure to the enlarged UBS.

That search for diversification steered clients toward domestically focused Swiss banks, many of which are smaller, regional players with little or no presence abroad. The inflow of new customers pushed up the need for local funding just as these same institutions faced constraints: without meaningful international operations, they have a narrower investor base and less access to global capital pools.

As demand surged in the Swiss capital market, local banks were forced to compete more aggressively for liquidity, particularly in short-term markets. This pushed swap spreads higher and lifted funding costs across the sector.

Tschudin noted that UBS itself has contributed indirectly to the shift. Many clients reported that the post-merger terms and services offered by UBS differ from what they previously received at Credit Suisse, prompting them to build relationships elsewhere and further increasing funding strain on smaller lenders.

A More Difficult Liquidity Environment Globally

The SNB also highlighted broader macroeconomic factors amplifying the pressure. Rising global government bond yields — driven in part by central banks pulling back purchases of sovereign debt — have tightened liquidity conditions across developed markets. This has made it more expensive for banks globally to raise capital, adding an external layer of stress to Switzerland’s domestic restructuring.

The combined effect is clear: the SNB says swap spreads, a key gauge of bank funding costs, have risen “noticeably” in recent quarters.

While the SNB did not raise alarms about systemic risk, the message is clear: Switzerland is entering a more complex era where banks must absorb higher structural funding costs even as they adjust to a post-Credit Suisse landscape.

What It Means for Credit Conditions

Higher funding costs typically make lending more expensive, and Tschudin acknowledged the impact these pressures can have on how banks price and grant loans. For a small, export-driven economy like Switzerland, lending conditions are central to business investment, real estate markets, and overall economic momentum.

Yet despite the higher costs, credit growth remains “robust,” Tschudin said — a signal that banks are still operating effectively and that monetary policy transmission remains intact.

That persistence of credit growth may also reflect the Swiss market’s distinctive structure: a strong corporate sector, resilient household finances, and historically conservative banking practices. But if funding costs remain elevated for a sustained period, policymakers may eventually need to confront the question of whether banking competition — and the post-merger restructuring of Swiss financial architecture — requires further adjustment.

For now, though, the SNB maintains confidence in the system. The UBS-Credit Suisse merger solved one immediate crisis. Its longer-term consequences, however, continue to reshape the contours of Swiss finance in ways the industry is still learning to navigate.