Art Basel’s main sponsor, UBS, completed its takeover of Credit Suisse this week, creating a mega-bank with $5 trillion in assets under management. The acquisition follows a government-backed Credit Suisse bailout that began in March, which averted a deeper banking crisis. As part of the deal, UBS bought its former rival for a knockdown price of $3.25 billion and assumed $5 billion of its debt – although in a subsequent regulatory filing UBS said that she’d been rushed into a deal she didn’t want.
Integration is now expected to drag on and thousands of jobs are still at risk. As part of the deal, UBS imposed strict restrictions on Credit Suisse bankers – for example, they must seek approval to make loans of more than $60 million backed by assets such as yachts and goods.
An art adviser with clients in Switzerland who prefers to remain anonymous says the takeover has been “very, very controversial. This is not the kind of thing that should happen in Switzerland. It is a calm and quiet place where people can store their wealth. An uproar like this is very anti-Swiss and not on brand.
Meanwhile, the lucrative sponsorship deals between Credit Suisse and several Swiss and foreign museums will be turned upside down in the coming months. Sponsorship deals in Switzerland currently under threat include those with Kunsthaus Zurich, which Credit Suisse has sponsored for more than 30 years; the Kunstmuseum Basel, where the bank has supported one exhibition per year since 2012; and the Fondation de l’Hermitage in Lausanne, which indicates that Credit Suisse covers an annual exposure, or approximately 6% to 8% of its annual budget. Outside Switzerland, an important partnership with the National Gallery in London, in place since 2008, is in play.
Banks don’t collect art to make money from it. They want something nice for their customers
The bank also maintains close ties with the Brazilian art world; José Olympio da Veiga Pereira, former managing director of Credit Suisse in Brazil, is an avid art collector and president of the Fundação Bienal de São Paulo. Although Credit Suisse donations are undisclosed, high-profile corporate sponsors such as banks and private equity firms can expect to contribute upwards of £500,000 for a blockbuster exhibition.
A UBS spokeswoman wouldn’t say whether the bank would fulfill partnerships Credit Suisse has already entered into, although she stressed the acquisition will not affect UBS’s sponsorship of Art Basel. She adds: “We recognize the important support that Credit Suisse gives to arts organizations in Switzerland and abroad. It’s too early to tell what additional partnerships and support for the arts will look like.
Credit Suisse takeover by UBS creates a mega-bank with $5 trillion in assets under management Photo: Valerio Rosati/Alamy Stock Photo
Anne Laure Bandle, a specialist in art law at the law firm Borel & Barbey in Geneva, believes that the existing agreements will be maintained by UBS, “unless the terms and agreements provide otherwise”.
Some key deals are due for renewal next year, including those with the Kunstmuseum Basel and the National Gallery in London. “Some museum directors have already turned to UBS,” says Bandle. She notes that there are certain Swiss cantons where the two banks have divided up the institutions they wish to support. “When these existing contracts expire, this distribution will be reviewed and potentially some institutions will no longer be supported.”
One of the biggest controversies of the takeover was the Swiss financial regulator’s decision to eliminate $17 billion worth of AT1 bonds (additional Tier 1 bonds, a type of hybrid debt instrument designed to give banks greater flexibility of capital in the event of a crisis). The anonymous art adviser says it could have an impact on the art world. “A lot of bondholders are from the Middle East and big art collectors, I guess,” he says. In April, some investors filed a lawsuit against the regulator, claiming it had acted unconstitutionally in canceling the bonds.
Echoes of 2008
Credit Suisse’s collapse has drawn comparisons to the banking crisis of 2008-09, when UBS was itself bailed out by Swiss taxpayers. As the anonymous art adviser notes, “banks aren’t exactly fashionable,” though he thinks that might mean UBS will tread carefully when it comes to suppressing all philanthropic activity. “They’re going to be very conscious of their reputation in Switzerland, and that probably doesn’t mean too many drastic cuts to Swiss museums and arts education.”
After the 2008-09 banking crisis, a number of corporate art collections were sold to help pay creditors. Large parts of the Lehman Brothers collection were sold at Sotheby’s in 2010, totaling $12 million (a further $2.5 million was made in a sale of “works of art and ephemera” at Christie’s). The Irish banking sector faced a deep crisis between 2008 and 2010 causing numerous sell-offs, particularly at the Anglo Irish Bank, whose modest collection reached around €280,000. Although such sums seem paltry, the auction of art collections can pave the way for the sale of other parts of a bank’s property.
Since 1975, Credit Suisse has assembled a collection of contemporary Swiss art, which today includes around 10,000 works by artists such as John Armleder, Monica Studer and Christoph van den Berg, Balthasar Burkhard and Yves Netzhammer. Its value is not disclosed. The UBS spokeswoman declined to comment on whether there were any plans to sell any of Credit Suisse’s art collections, but, as Bandle points out, “the purpose of the collection was never to become an investment asset for sale”.
Started in the 1960s, UBS’s own collection has swelled to 30,000 coins, in part because it acquired other individual collections through various mergers and acquisitions, including Swiss Bank Corporation and PaineWebber Inc.
Bandle adds, “Most banks don’t collect art for money. They collect because they want to support and promote these artists, and they want something cool to display for their clients and employees in their offices.
• Learn more about the effect of the banking crisis on the art world on art week podcast
