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GENEVA — UBS’s takeover of struggling rival Credit Suisse has shaken Switzerland’s self-image and reputation as a global financial center, analysts say, warning that the country’s prosperity could become too dependent on a single banking giant.

The uncertain future of a union of Switzerland’s two global banks comes at a thorny time for Swiss identity, built almost as much on a self-image of financial finesse as on chocolate savvy, watches and cheese.

Regulators who helped orchestrate the $3.25 billion deal have a lot to do as UBS checks its rival’s books, picks the parts it wants and does without.

“The real question is what’s going to happen, because now we’re going to have a juggernaut – a monster – that will get bigger and bigger to break down,” said Marc Chesney, professor of finance at the University of Zürich. “The danger is that over time, we take more risks knowing that it is too big for the Swiss state to abandon it.”

After studying the numbers, he said, the total value of exotic securities — like options or futures — held by the merged bank could be worth 40 times Switzerland’s economic output.

“Over time, UBS will control the Swiss state, rather than the other way around,” Chesney said.

This neutral and prosperous country of around 8.5 million people enjoys the highest gross domestic product per capita of any country of its size. Switzerland’s relatively low-tax and privacy-friendly environment attracts affluent expats and consistently ranks among the most innovative countries. Over generations, it has become a global hub for wealth management, private banking and commodities trading.

This climate has also spawned a reputation as a secret haven for billions of ill-gotten or laundered money, with the Tax Justice Network ranking Switzerland second only to the United States when it comes to financial secrecy.

It came to light this week when a two-year investigation by a US Senate committee found Credit Suisse breached a plea deal with US authorities by failing to report secret offshore accounts that wealthy Americans used to avoid paying taxes.

Such turmoil at Switzerland’s second largest bank, which also includes hedge fund losses and fines for failing to prevent money laundering by a Bulgarian cocaine ring, has left it vulnerable as the collapse from a US bank caused upheaval in the market this month.

Today, many conservatives are renewing their calls for Switzerland to withdraw into itself.

Christoph Blocher, a former government minister and broker for the right-wing Swiss People’s Party, called the Credit Suisse-UBS deal “very, very dangerous, not just for Switzerland or the United States, but for the whole world.”

“It must stop,” he told French-language public channel RTS. “Swiss banks must remain Swiss and maintain their operations in Switzerland.”

If Switzerland wants to be a strong financial center, it needs a strong bank of global significance, said Sergio Ermotti, who was CEO of UBS for nine years and will return to help drive the takeover.

“To me, today’s debate is not ‘too big to fail’ – rather, it’s ‘too small to survive,'” Ermotti told a news conference this week. “And we want to come out on top.”

Grégoire Bordier, scion of an illustrious family of Geneva bankers and president of the Association of Swiss Private Banks, played down the size of the merged institution, believing it would have roughly the same weight in Switzerland as the Dutch giant. ING compared to the Dutch economy. to go out.

“Rather than organizing the dissection of the last great “universal bank” of this country – and making it benefit the rival financial companies –, it is above all necessary to put in place much greater control measures for the new UBS” , Bordier told the Tribune de Genève.

Still, he acknowledged that the potential significance of the combined entity in Switzerland was “a different matter”, saying he had reacted to the banks’ forced marriage, advertised on prime-time TV, as if it was watching “a bad soap opera”.

Critics say the federal government was asleep at the wheel and learned nothing from the 2008 global financial crisis.

Blocher’s protege Ueli Maurer – who was finance minister until his resignation in December – has championed a hands-off approach to banks like Credit Suisse to let them sort out their own problems.

The Credit Suisse bailout is a stain on regulators and the idea that putting money in a Swiss bank means it’s “sound and safe”, overseen by the best financial managers in the world, said Octavio Marenzi, CEO of consulting firm Opimas LLC.

“That reputation has gone up in smoke, and it’s very hard to get that reputation back,” Marenzi said. “Unfortunately, a reputation that you have built up over years and decades and maybe even centuries, you can destroy very quickly.”

Beyond the bank, Switzerland’s image has been unstable lately, sparking debate ahead of the October legislative elections.

A web of bilateral deals with the European Union, Switzerland’s biggest trading partner, is clouded by a standoff with Brussels. The country’s constitutional commitment to “neutrality” has angered Western nations who are barred from shipping Swiss-made weapons to Ukraine so it can fight Russia.

Swiss diplomats, who have been intermediaries between Iran and Saudi Arabia since the countries severed ties in 2016, were absent as China brokered a deal this month to restore ties between the rivals from the Middle-East.

Scott Miller, US Ambassador to Switzerland and former UBS executive in Colorado, has raised the debate on how the European country interprets its idea of ​​neutrality.

Miller told the Neue Zueicher Zeiting newspaper this month that Switzerland was facing its “greatest crisis since World War II” and urged the Swiss to do more to help Ukraine defend itself – or at least do not prevent others from doing so.

Before the bank wedding was staged on March 19, Credit Suisse was hemorrhaging deposits, shareholders were selling their shares and creditors were rushing to demand repayment.

Since then, some smaller Swiss banks have reported an influx of deposits from Credit Suisse clients. Employees face the prospect of sweeping job cuts, though the details could take weeks or months to iron out.

The fallout is far from over.

A special session of parliament next month is expected to discuss the takeover, including “too big to fail” legislation and possible sanctions against Credit Suisse executives.

Sascha Steffen, professor of finance at the Frankfurt School of Finance in Germany & Management said “having such a huge bank isn’t necessarily bad,” pointing to the efficiencies.

But the creation of a giant could make it harder for small businesses to get credit. The way the takeover was carried out — using emergency measures to change Swiss law and avoiding the bondholder-shareholder pecking order over losses — unsettled investors.

“The fake marriage that was initiated by the government was something the markets don’t really like, especially when there was no involvement from other stakeholders,” Steffen said.

“The attractiveness as an investment location is definitely damaged,” he said.

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AP Business Writers David McHugh in Frankfurt, Germany, and Courtney Bonnell in London contributed.