UBS has announced the acquisition of Link Investimentos, the Brazilian brokerage firm, as well as obtaining a much-sought after Brazilian banking licence.
Since the Swiss bank sold Pactual in 2009 it has been looking for a way to re-enter the largest Latin American market. The deal to buy Link, which was agreed in April 2010, has been a central part of the bank’s subsequent Brazilian strategy. UBS combined its application for regulatory approval of what is the largest brokerage firm, in terms of daily volumes of equity trades, with its request for a banking licence. However, during that time RBS’s decision to withdraw from Brazil, after it had already secured Brazilian government approval, made acquiring licences for other foreign banks a more complicated process.
“The link side of the equation was the simplest in many ways but also the most complicated to execute. We reached an agreement with Link’s management and then we had to wait for the regulatory approval and banking licence,” says Mark Tuttle, UBS’s head of Latin America debt and equity capital markets.
In effect, the Brazilian government now requires both new local and foreign entities that are seeking to obtain a bank licence to buy one of the legacy banks the central bank has on its books. Tuttle declines to comment on whether UBS had been obliged to buy one of these old Brazilian banks as a means to gain regulatory approval to bank in Brazil but a source close to UBS’s discussions with the central bank says UBS was presented with a list of about 30 Brazilian banks and told to choose one to buy. The due diligence and negotiations added complexity, cost and above all time to the process. “RBS’s decision to pull out came at the worst possible moment for the rest of the foreign banks that were waiting for a licence,” says the source. “RBS pulled out just after [President] Dilma [Rousseff] had signed RBS’s licence personally and the subsequent withdrawal was therefore more than a little embarrassing for all concerned.”
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