Fed Gives Its OK to Merger of Two Swiss Banks

The Federal Reserve Board on Monday gave its OK to a merger of Union Bank of Switzerland and Swiss Bank Corp., the final hurdle remaining for the merger, expected to be completed this month.

The combined entity would be the world’s second-largest bank.

The Fed has jurisdiction over all foreign bank operations in the United States. Its decision approves the U.S. operations that will result from the Swiss banks’ merger.

The Fed said it reviewed criticism that the banks had not done enough to settle claims regarding assets of Jewish Holocaust victims and their heirs dating to World War II, but that many of the concerns were outside its jurisdiction. In cases in which the Fed had authority, it found it had no grounds to hold up the merger. The approval came on a 5-0 vote, with two governors absent.

The vote came only days after the New York State Banking Department gave its approval, after having determined that the banks had acted in good faith to help resolve all the issues related to dormant assets at the end of the war.

“Both banks are pleased by this decision,” the Swiss banks said in a joint statement.

The Fed’s approval was denounced by Senate Banking Committee Chairman Alfonse M. D’Amato, a New York Republican who has been active in trying to recover Nazi victims’ assets held in Swiss banks.

“These two Swiss banks purposely withheld the assets of Holocaust victims and their heirs for over 50 years,” D’Amato said. “I am disappointed and concerned at the Fed’s approval of this merger.”

But a spokesman for the World Jewish Congress, one of the key Jewish negotiators with the Swiss banks, said Fed approval was inevitable after the New York state regulatory body gave its backing.

A source close to recent talks between Jewish negotiators and the Swiss banks told Reuters last week that the World Jewish Congress had told New York regulators that it would have no objection to the merger.