The UBS takeover of embattled rival Credit Suisse has shaken Switzerland’s self-image and dented its reputation as a global financial center, analysts say, warning that the country’s prosperity could grow too dependent on a single banking behemoth.

The uncertain future of a union of Switzerland’s two global banks comes at a thorny time for Swiss identity, built nearly as much on a self-image of finesse in finance as on know-how with chocolate, watchmaking and cheese.

Regulators who helped orchestrate the $3.25 billion deal have a lot on their plates as UBS checks the books of its rival, cherry-picks the parts it wants and dispenses with the rest.

“The real question is what’s going to happen, because we’ll now have a mastodon - a monster - that will be increasingly too big to fail,” said Marc Chesney, a finance professor at the University of Zurich. “The danger is that over time, it will take more risks knowing that it is too big for the Swiss state to abandon it.”

After studying the numbers, he said, the total value of exotic securities - like options or future contracts - held by the merged bank could be worth 40 times Switzerland’s economic output.

“Over time, UBS will control the Swiss state, rather than the other way around,” Chesney said.

The neutral, prosperous country of about 8.5 million people enjoys the highest gross domestic product per capita of any country its size. Switzerland’s relatively low-tax and pro-privacy environment draws well-heeled expats, and it regularly ranks among the most innovative countries. Over generations, it has become a global hub for wealth management, private banking and commodities trading.

That climate also has bred a reputation as a secret haven of billions in ill-gotten or laundered money, with the Tax Justice Network ranking Switzerland second only to the US in financial secrecy.

That was on display this week when a US Senate committee’s two-year investigation found that Credit Suisse violated a plea agreement with US authorities by failing to report secret offshore accounts that wealthy Americans used to avoid paying taxes.

Such turmoil at the Switzerland’s second-largest bank, which also includes hedge fund losses and fines for failing to prevent money laundering by a Bulgarian cocaine ring, made it vulnerable as US bank collapses stirred market upheaval this month.

Now, many conservatives are reviving their calls for Switzerland to turn inward.

Christoph Blocher, a former government minister and power broker of the right-wing Swiss People’s Party, blasted the Credit Suisse-UBS deal as “very, very dangerous, not just for Switzerland or the United States, but the entire world.”

“This has to stop,” he told French-language public broadcaster RTS. “Swiss banks must remain Swiss and keep their operations in Switzerland.”

If Switzerland wants to be a strong financial center, it needs a strong globally significant bank, said Sergio Ermotti, who was CEO at UBS for nine years and will return to help shepherd the takeover.

“For me, the debate nowadays is not ‘too big to fail’ - it’s rather ‘too small to survive,’” Ermotti said at a news conference this week. ”And we want to be a winner out of this.”

Gregoire Bordier, scion of an illustrious Geneva banking family who chairs the Association of Swiss Private Banks, played down the size of the merged institution, estimating that it would have roughly the same weight in Switzerland as Dutch giant ING does relative to the Netherlands’ economic output.

“Rather than arranging the dissection of the last great ‘universal bank’ in this country - and let rival finance companies benefit - it’s above all necessary to roll out much greater control measures for the new UBS,” Bordier told the Tribune de Geneve newspaper.

Still, he acknowledged that the combined entity’s potential importance within Switzerland was “another question,” saying he reacted to the banks’ shotgun marriage, announced on prime-time TV, as if watching “a bad soap opera.”

Critics say the federal government was asleep at the wheel and hadn’t learned from the 2008 global financial crisis. Blocher’s protégé, Ueli Maurer - who was finance minister until stepping down in December - championed a hands-off approach to banks like Credit Suisse to let them sort out their own troubles.

The Credit Suisse rescue is a stain on regulators and the idea that putting money into a Swiss bank means it’s “rock solid and safe,” overseen by the world’s best financial managers, said Octavio Marenzi, CEO of consulting firm Opimas LLC.

“That reputation has gone up in smoke, and it’s very hard to regain that reputation,” Marenzi said. “Unfortunately, a reputation that you built up over years and decades and maybe even centuries, you can destroy really quickly.”

Beyond banking, Switzerland’s image has been unsteady recently, generating debate ahead of parliamentary elections in October. A web of bilateral deals with the European Union, Switzerland’s biggest trading partner, are clouded under a standoff with Brussels. The country’s constitutionally enshrined commitment to “neutrality” has angered Western nations that are blocked from shipping Swiss-made arms to Ukraine so it can fight Russia.

Associated Press