Credit Suisse Calls off China Bank Plan to Avoid Regulatory Conflict Under UBS

Credit Suisse has scrapped plans to set up a locally incorporated bank in China to sidestep a potential regulatory conflict arising from its merger with UBS, said two sources with direct knowledge of the matter.

Embattled Credit Suisse had been preparing for years to set up a wholly owned local bank in China. A locally incorporated bank would have boosted its presence in the country by allowing it to set up a branch network to draw deposits and expand its onshore wealth management business.

The reason for the Swiss lender's decision was that UBS, which is acquiring Credit Suisse as part of a government-orchestrated rescue of its smaller rival, already has a locally incorporated bank in China, said the sources.

In China, a financial entity can apply for and get only one such license.

Credit Suisse's decision to ditch its local bank plan could be a precursor to similar moves it and UBS make on other businesses in China such as asset management and brokerages where they both have operating units, in order to not breach regulations.

It was not immediately clear if the local regulators have been informed of Credit Suisse's decision, but one of the sources said that the move to drop the plan had been communicated to the bank's local staff.

(Source: Reuters)