The Union Bank of Switzerland board took only two days to unanimously reject a merger proposal by Swiss banking rival CS Holdings.

After a surprise proposal on Tuesday from Zurich-based CS Holdings, the 20-member board on Thursday dismissed the proposal, with chairman Nikolaus Senn reportedly calling it "coercion."

The merger would have created the second largest bank in the world, behind the newly merged Bank of Tokyo-Mitsubishi Ltd.

Mr. Senn said that CS Holdings chairman Rainer E. Gut asked him to make a final merger decision before UBS' annual shareholders meeting next Tuesday.

"And that is in my opinion is unreasonable, because we're so different in terms of our strengths and culture," Mr. Senn said.

In announcing that it has rejected the CS Holdings proposal, UBS also indicated merger plans of its own, saying that it is still considering acquiring an investment or asset management company in Europe or the United States.

The merger would have created a bank with more than $400 billion of assets and a significant presence in several U.S. financial services. The two banks combined have $25 billion of U.S. assets.

CS Holdings had suggested that the current challenges in the financial services industry presented compelling reasons for its surprise offering.

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

Analysts had noted the difficulties of combining the two banks.

"The clash between the two cultures could be severe, and there could be some real turf battles," said John Leonard, a bank analyst as Salomon Brothers in London.

Had the two banks merged, it would have created the world's biggest asset manager and the biggest bank owning a major securities firm.

The merger would have cost an estimated 20,000 jobs in Switzerland.

UBS continues to face pressure from activist shareholder Martin Ebner, whose BK Vision controls a large stake in the country's largest bank.

This story was compiled from reports by Dow Jones, Bloomberg, and American Banker staff.

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