London, Mar 23 (IANS): The last-minute rescue of Credit Suisse may have prevented the current banking crisis from exploding, but its a raw deal for Switzerland, according to a media report.

Worries that Credit Suisse's downfall would spark a broader banking meltdown left Swiss regulators with few good options, CNN reported.

A tie-up with its larger rival, UBS, offered the best chance of restoring stability in the banking sector globally and in Switzerland, and protecting the Swiss economy in the near term.

But it leaves Switzerland exposed to a single massive financial institution, even as there is still huge uncertainty over how successful the mega merger will prove to be, CNN reported.

At roughly $1.7 trillion, the combined assets of the new entity amount to double the size of Switzerland's annual economic output. By deposits and loans to Swiss customers, UBS will now be bigger than the next two local banks combined, CNN reported.

With a roughly 30 per cent market share in Swiss banking, "we see too much concentration risk and market share control", JPMorgan analysts wrote in a note last week before the deal was sealed. They suggested that the combined entity would need to exit or IPO some businesses.

The problem with having one single large bank in a small economy is that if it faces a bank run or needs a bailout - which UBS did during the 2008 crisis - the government's financial firepower may be insufficient.

At 333 billion francs ($363 billion), local deposits in the new entity equal 45 per cent of GDP - an enormous amount even for a country with healthy public finances and low levels of debt, CNN reported.

"One of the most established facts in academic research is that bank mergers hardly ever work," said Arturo Bris, a professor of finance at Swiss business school IMD.

There are also concerns that the deal will lead to huge job losses in Switzerland and weaken competition in the country's vital financial sector, which overall employs more than 5 per cent of the national workforce, or nearly 212,000 people.

The demise of one of Switzerland's oldest institutions has come as a shock to many of its citizens. Credit Suisse is "part of Switzerland's identity", said Hans Gersbach, a professor of macroeconomics at ETH University in Zurich. The bank "has been instrumental in the development of modern Switzerland", CNN reported.

Its collapse has also tainted Switzerland's reputation as a safe and stable global financial centre, particularly after the government effectively stripped the shareholders of voting rights to get the deal done.