HONG KONG/SHANGHAI -Credit Suisse has scrapped plans to set up a locally incorporated bank in China to avoid a potential regulatory conflict arising from its merger with UBS, said two sources with direct knowledge of the matter.
Credit Suisse had been planning over several years to set up a wholly owned local bank in China that would boost 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 embattled Swiss bank currently offers wealth management, securities brokerage, and investment consulting services in the world’s second-largest economy to clients under its securities joint venture.
After years of preparations, Credit Suisse has now decided to abort its plan to apply for a license to set up the so-called locally incorporated bank, said the two sources.
The reason for the decision to drop the plan was that UBS, which is acquiring Credit Suisse as part of a government-orchestrated rescue of its Swiss 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 and UBS declined to comment. China’s banking regulator, National Financial Regulatory Administration, did not immediately respond to a Reuters request for comment.
It was not immediately clear if the local regulators have been informed of the decision, but one of the sources said that the move to drop the plan had been communicated to the bank’s local staff.
Credit Suisse’s decision to ditch its China local bank plan could be a precursor to similar moves it and UBS make on other businesses such as asset management and brokerages where they both have operating units, in order to not breach regulations.
UBS, twice as big as Credit Suisse by assets, agreed to buy its rival for 3 billion Swiss francs ($3.3 billion) in stock and to assume up to 5 billion francs in losses in March, in a merger engineered by Swiss authorities to avert contagion in global banking.