ZURICH • The chairmen of UBS Group and Credit Suisse Group are exploring a potential merger to create one of Europe’s largest banks, Inside Paradeplatz reported, citing unidentified people from the two lenders.

The project, nicknamed Signal, is being driven by UBS chairman Axel Weber, who is working on it with his Credit Suisse counterpart Urs Rohner, the Swiss finance blog said.

Mr Weber has discussed the idea with Swiss Finance Minister Ueli Maurer and an agreement could happen by early next year, according to the report.

Spokesmen for the two banks declined to comment.

Europe’s banking industry is under pressure to consolidate as the coronavirus pandemic adds to headwinds from negative interest rates. Spain’s CaixaBank and Bankia said this month they are exploring a merger to form the largest lender in the country and kick-start consolidation.

While a deal between the two Swiss banks would allow for overlap to be eliminated, executing such a transaction could be difficult, said Mr Andreas Venditti, an analyst at Vontobel.

“Regulation would be the biggest hurdle in my eyes” because requirements are tougher the larger an institution is, Mr Venditti said, adding that he does not think a deal is likely.

Credit Suisse shares rose 2 per cent just before noon in Zurich, and UBS gained 1.3 per cent.

UBS is in the middle of a leadership transition, with former ING Groep head Ralph Hamers taking over from chief executive Sergio Ermotti in November.

Mr Weber would probably stay on as chairman of the combined entity, making it likely the CEO would come from Credit Suisse, according to the report.

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A merger could result in job cuts equal to between 10 per cent and 20 per cent of the workforce, or 15,000 or more worldwide, according to the report.

Banking regulator Finma has been informed of the deliberations, Inside Paradeplatz said.

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