A proposed merger between Switzerland's two largest banks would create a banking powerhouse with more than $400 billion of worldwide assets and a significant presence in several U.S. financial sectors.

Zurich-based CS Holding, parent company of Credit Suisse, confirmed Tuesday that it has suggested a merger with Union Bank of Switzerland. UBS, Switzerland's biggest bank, said its board would meet Thursday to decide on the offer.

"The challenges thrown up by the globalization of financial services and the continuing restructuring process within Switzerland's banking industry demanded farsighted solutions," CS Holding said in a statement.

The two banks combined have more than $25 billion of U.S. assets, excluding offshore holdings. Both are large players in private banking and institutional asset management. And both are building their investment banking units, New York-based UBS Securities Inc. and CS First Boston. (A "grandfather clause" in the International Banking Act of 1978 exempts both from restrictions on investment banking that apply to domestic banks.)

CS First Boston ranked third in the United States in mergers and acquisitions last year, advising on $75 billion of transactions. UBS ranked 21st, with $6 billion, according to Securities Data Co., an American Banker affiliate.

Legal sources and analysts said it was an open question whether the two banks could merge without running into regulatory difficulties both here and in Switzerland.

"The two banks would hold around half the banking market in Switzerland, and this could pose big antitrust issues," said John Leonard, a banking analyst at Salomon Brothers Inc. in London.

He added that Credit Suisse would also have to curtail its U.S. operations severely if regulators here insisted that the bank give up its grandfathered status and convert its investment banking license into a Section 20 subsidiary.

The International Banking Act bars foreign banks with grandfathered investment banking operations from making acquisitions. However, legal sources were unsure whether the restriction would apply in this case, since both banks are grandfathered.

John P.C. Duncan of Jones Day Reavis & Pogue in Chicago said that, if the deal is done as a merger, CS First Boston would probably become a Section 20 subsidiary, with limited underwriting powers. He added that this would be "entirely possible and not difficult, though a nuisance."

Analysts added that the two banks could run into problems combining their operations even if legal obstacles are surmounted. "The clash between the two cultures could be severe, and there could be some real turf battles," Mr. Leonard said.

Daniel Kaplan contributed to this article.

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