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|Further information: Swiss Bank Corporation and Union
Bank of Switzerland
UBS, as it exists today, is the result of a complex history representing a merger product of the Union Bank of Switzerland and the Swiss Bank Corporation in June 1998 (SBC). The official founding date of the bank is April 1862, the year when its nucleus Bank in Winterthur was founded.
Although the merged company's new name was originally supposed to be the "United Bank of Switzerland," the officials opted to call it simply UBS because of a name clash with the separate Swiss company United Bank Switzerland – a part of the United Bank Limited's Swiss subsidiary. Therefore, UBS is no longer an acronym but is the company's brand. Its logo of three keys, carried over from SBC, stands for the company's values of confidence, security, and discretion.
UBS also comprises a number of well-known securities firms that have been acquired by the bank and its predecessors. Among the bank's most notable constituent parts are Paine Webber, Dillon, Read & Co., Kidder Peabody and Company., Phillips & Drew, S. G. Warburg & Co., Blyth, Eastman, Dillon & Co., Jackson & Curtis, and Union Securities, among others.
Swiss Bank CorporationOrigins and early years (1854–1945)
Swiss Bank Corporation logo (ca. 1973), featuring the three keys meant to symbolize confidence, security, and discretion.UBS, through Swiss Bank Corporation, traces its history to 1854 when six private banking firms in Basel, Switzerland pooled their resources to form the Bankverein, a consortium that acted as an underwriting syndicate for its member banks. In 1871, the Bankverein coordinated with the German Frankfurter Bankverein to form the Basler Bankverein, a joint-stock company replacing the original Bankverein consortium. After the new bank started with an initial commitment of CHF 30 million and CHF 6 million of share capital, it soon experienced growing pains when heavy losses in Germany caused it to suspend its dividend until 1879. Following the years 1885 and 1886, when the bank merged with the Zürcher Bankverein and acquired the Basler Depositenbank and the Schweizerische Unionbank, it changed its name to Schweizerischer Bankverein. The English name of the bank was originally Swiss Bankverein, but was changed to Swiss Bank Corporation (SBC) in 1917.
The Basel offices of Swiss Bank Corporation c.1920SBC subsequently experienced a period of growth, which was only interrupted by the onset of World War I, in which the bank lost investments in a number of large industrial companies. By the end of 1918, the bank had recovered and surpassed CHF 1 billion in total assets and grew to 2,000 employees by 1920. The impact of the stock market crash of 1929 and the Great Depression was severe, particularly as the Swiss franc suffered major devaluation in 1936. The bank saw its assets fall from a 1929 peak of CHF 1.6 billion to its 1918 levels of CHF 1 billion by 1936.
In 1937, SBC adopted its three-keys logo, designed by Warja Honegger-Lavater, symbolizing confidence, security, and discretion, which remains an integral part in the current-day logo of UBS.
On the eve of World War II in 1939, SBC, like other Swiss banks, was the recipient of large influxes of foreign funds for safekeeping. Just prior to the outbreak of the war, SBC made the timely decision to open an office in New York City. The office, located in the Equitable Building, was able to begin operations a few weeks after the outbreak of the war and was intended as a safe place to store assets in the case of an invasion. During the war, the banks' traditional business fell off and the Swiss government became their largest client.
Post-war years (1945–1998)In 1945, SBC acquired the Basler Handelsbank (Commercial Bank of Basel), which was one of the largest banks in Switzerland, but became insolvent by the end of the war. SBC remained among the Swiss government's leading underwriters of debt in the post-war years. SBC, which had entered the 1950s with 31 branch offices in Switzerland and three abroad, more than doubled its assets from the end of the war to CHF 4 billion by the end of the 1950s and doubled assets again in the mid-1960s, exceeding CHF 10 billion by 1965.
In 1961, SBC acquired Banque Populaire Valaisanne, based in Sion, Switzerland and the Banque Populaire de Sierre. The bank opened a full branch office in Tokyo in 1970.
Former Swiss Bank Tower at 623 Fifth Avenue, New York City, opened in 1990.In 1992, SBC acquired O'Connor & Associates, a Chicago-based options trading firm and the largest market maker in the financial options exchanges in the U.S. O'Connor was combined with SBC's money market, capital market, and currency market activities to form a globally integrated capital markets and treasury operation.
In 1994, SBC acquired Brinson Partners, an asset management firm focused on providing access for U.S. institutions to global markets, for US$750 million. Following the acquisition, founder Gary P. Brinson ran SBC's asset management business and later when SBC merged with UBS was named chief investment officer of UBS Asset Management.
The acquisition of S.G. Warburg & Co., a leading British investment banking firm, in 1995 for the price of US$1.4 billion signified a major push into investment banking. S.G. Warburg & Co. had established a reputation as a daring merchant bank that grew to be one of the most respected investment banks in London. However, a Warburg expansion into the U.S. had turned out flawed and costly, and talks in 1994 with Morgan Stanley about a merger had collapsed. SBC merged the firm with its own existing investment banking unit to create SBC Warburg.
Warburg Dillon Read (originally SBC-Warburg Dillon Read) was the brand used for the Investment Banking division of Swiss Bank Corporation and later UBS from 1997 to 1999.Two years later, in 1997, SBC paid US$600 million to acquire Dillon, Read & Co., a U.S. bulge bracket investment bank.
Dillon, Read & Co., which traced its roots to the 1830s was among the powerhouse firms on Wall Street in the 1920s and 1930s, and by the 1990s had a particularly strong mergers and acquisitions advisory group. Dillon Read had been in negotiations to sell itself to ING, which owned 25% of the firm already, but Dillon Read partners balked at ING's integration plans.
After its acquisition by SBC, Dillon Read was merged with SBC-Warburg to create SBC-Warburg Dillon Read. Following SBC's later merger with Union Bank of Switzerland, the SBC part was dropped from the name; in 2000 when the new UBS got restructured the Dillon Read name was dropped, although it was brought back in 2005 as Dillon Read Capital Management, UBS's ill-fated hedge fund operations.
Union Bank of SwitzerlandOrigins and early years (1862–1945)
1966 Union Bank of Switzerland logo, featuring the two acronyms of its English and French names (UBS) and its German counterpart (SBG).The Union Bank of Switzerland emerged in 1912 when the Bank in Winterthur fused with the Toggenburger Bank. The Bank in Winterthur, founded in 1862 with an initial share capital of CHF 5 million, focused on providing financing for industry and other companies, and had profited considerably from its close railroad connections and large warehousing facilities during the American Civil War when cotton prices rose dramatically. The Toggenburger Bank was founded in 1863 with an initial share capital of CHF 1.5 million, and specialized as a savings and mortgage bank for individual customers, maintaining a branch office network in eastern Switzerland.
Bank in Winterthur, est. 1862
Toggenburger Bank, est. 1863The new company was initially traded under the English name Swiss Banking Association, but in 1921 it was changed to Union Bank of Switzerland (UBS) to mirror its French name, Union de Banques Suisses. In German, the bank was known as the Schweizerische Bankgesellschaft (SBG).
The combined bank had total assets of CHF 202 million and a total shareholders' equity of CHF 46 million. In 1917, UBS completed the construction of a new headquarters in Zurich on Bahnhofstrasse, considered to be the Wall Street of Switzerland. By 1923, offices were established throughout Switzerland. Although the bank suffered in the aftermath of World War I and the Great Depression, it was able to make several smaller acquisitions; in 1937 it established Intrag AG, an asset management business responsible for investment trusts, (i.e. mutual funds).
Activities in World War II
Gold ingot with the UBS logo.The activities of the Union Bank of Switzerland during World War II were not publicly known until decades after the war, when it was demonstrated that UBS likely took active roles in trading stolen gold, securities, and other assets during World War II.
The issue of "unclaimed property" of Holocaust victims became a major issue for UBS in the mid-1990s, and a series of revelations in 1997 brought the issue to the forefront of national attention in 1996 and 1997.
UBS confirmed that a large number of accounts had gone unclaimed as a result of the bank's policy of requiring death certificates from family members to claim the contents of the account. UBS's handling of these revelations were largely criticized and the bank received significant negative attention in the U.S.
UBS came under significant pressure, particularly from American politicians, to compensate Holocaust survivors who were making claims against the bank.
In January 1997, Christoph Meili, a night watchman at the Union Bank of Switzerland, found employees shredding archives compiled by a subsidiary that had extensive dealings with Nazi Germany. The shredding was in direct violation of a then-recent Swiss law adopted in December 1996 protecting such material. UBS acknowledged that it had "made a deplorable mistake", but an internal historian maintained that the destroyed archives were unrelated to the Holocaust. Criminal proceedings then began against the archivist for possible violation of a recent Federal Document Destruction decree and against Meili for possible violation of bank secrecy, which is a criminal offense in Switzerland. Both proceedings were discontinued by the District Attorney in September 1997.
Meili was suspended from his job at the security company that served UBS, following a criminal investigation. Meili and his family left Switzerland for the United States where they were granted political asylum.
In 1997, the World Jewish Congress lawsuit against Swiss banks was launched to retrieve deposits made by victims of Nazi persecution during and prior to World War II, ultimately resulting in a settlement of US$1.25 billion in August 1998.
Post-war years (1945–1998)Shortly after the end of World War II, Union Bank of Switzerland completed the acquisition of the Eidgenössische Bank, a large Zürich-based bank that became insolvent. As a result of the merger, Union Bank of Switzerland exceeded CHF 1 billion in assets and moved its operations to Zurich. UBS opened branches and acquired a series of banks in Switzerland in the following years, growing from 31 offices in 1950 to 81 offices by the early 1960s.
In 1960, Union Bank of Switzerland acquired an 80% stake in Argor SA, a Swiss precious metals refinery founded in 1951 in the canton of Ticino. In 1973, the bank increased the stake to full 100% ownership, though the ownership was ultimately sold between 1986 and 1999 to Argor-Heraeus SA. UBS continues to issue gold bars via Argor-Heraeus which is famous for the unique kinebar holographic technology it uses to provide enhanced protection against bank gold bar counterfeiting.
By 1962, Union Bank of Switzerland reached CHF 6.96 billion of assets, narrowly edging ahead of Swiss Bank Corporation to become the largest bank in Switzerland. The rapid growth was punctuated by the 1967 acquisition of Interhandel (Industrie- und Handelsbeteiligungen AG, the corporate successor of I.G. Chemie), which made UBS one of the strongest banks in Europe. Interhandel had become cash-rich when a dispute concerning GAF Materials Corporation, a subsidiary formerly known as General Aniline & Film and seized by the U.S. government during the war, was resolved in 1963 and the subsidiary was disposed of.
By the 1980s, Union Bank of Switzerland established a position as a leading European underwriter of eurobonds. Following two major acquisitions in 1986 (Phillips & Drew and Deutsche Länderbank), UBS made its first purchase in the United States in 1991 with Chase Investors Management Corporation, the asset management business of Chase Manhattan Bank. At the time of the acquisition, the business managed in excess of US$30 billion in assets.
Union Bank of Switzerland entered the 1990s as the largest and most conservative of the three large Swiss Banks. The bank's investments had been in the conservative asset management and life insurance businesses; further, 60% of the bank's profits came from its even more conservative Swiss banking operations.
In 1993, Credit Suisse outbid Union Bank of Switzerland for Switzerland's Swiss Volksbank, the fifth largest bank in Switzerland which had run into financial difficulties in the early 1990s. The acquisition propelled Credit Suisse ahead of Union Bank of Switzerland as the largest bank in Switzerland for the first time. Prior to the merger with Swiss Bank Corporation, UBS purchased a group of smaller Swiss banks in 1994 including the Cantonal Bank of Appenzell-Ausserrhoden in 1996, and in 1997 Schröder, Münchmeyer, Hengst & Co. from Lloyds Bank was acquired to improve access to the German investment banking and private wealth management markets.
Merger of Union Bank of Switzerland and Swiss Bank Corporation
UBS's principal office at Bahnhofstrasse 45 in Zurich, depicting the current logo, which combines the UBS letters with SBC's "three keys" symbol.During the mid-1990s, Union Bank of Switzerland came under fire from dissident shareholders critical of its conservative management and lower return on equity.
Martin Ebner, through his investment trust, BK Vision, became the largest shareholder in Union Bank of Switzerland and attempted to force a major restructuring of the bank's operations. Looking to take advantage of the situation, Credit Suisse approached Union Bank of Switzerland about a merger that would have created the second largest bank in the world in 1996. Union Bank of Switzerland's management and board unanimously rebuffed the proposed merger. Ebner, who supported the idea of a merger, led a shareholder revolt that resulted in the replacement of Union Bank of Switzerland's chairman, Robert Studer with Mathis Cabiallavetta, one of the key architects of the merger with Swiss Bank Corporation.
On 8 December 1997, Union Bank of Switzerland and Swiss Bank Corporation announced an all-stock merger. At the time of the merger, Union Bank of Switzerland and Swiss Bank Corporation were the second and third largest banks in Switzerland, respectively. Discussions between the two banks had begun several months earlier, less than a year after rebuffing Credit Suisse's merger overtures.
The merger resulted in the creation of UBS AG, a huge new bank with total assets of more than US$590 billion.
Also referred to as the "New UBS" to distinguish itself from the former Union Bank of Switzerland, the combined bank became the second largest in the world at the time, behind only the Bank of Tokyo-Mitsubishi. Additionally, the merger pulled together the banks' various asset management businesses to create the world's largest money manager, with approximately US$910 billion in assets under management. The combined entity was originally to be called United Bank of Switzerland, but foreseeing a problem with United Bank Switzerland, opted for UBS.
The merger, which was billed as a merger of equals, resulted in the Union Bank of Switzerland's shareholders receiving 60% of the combined company and Swiss Bank's shareholders receiving the remaining 40% of the bank's common shares. Union Bank of Switzerland's Mathis Cabiallavetta became chairman of the new bank while Swiss Bank's Marcel Ospel was named chief executive officer.
Nearly 80% of the top management positions were filled by legacy Swiss Bank professionals. Prior to the merger, Swiss Bank Corporation was considered to be further along than Union Bank of Switzerland in developing its international investment banking business, particularly in the higher margin advisory businesses where Warburg Dillon Read was considered to be the more established platform.
Union Bank of Switzerland had a stronger retail and commercial banking business in Switzerland, while both banks had strong asset management capabilities. After the merger was completed, it was speculated that a series of losses suffered by UBS on its equity derivative positions in late 1997 was a contributing factor in pushing UBS management to consummate the merger.