The financial world marked a sober anniversary last month as Switzerland's UBS completed its controversial takeover of rival Credit Suisse. What was once considered unthinkable - the disappearance of a 167-year-old pillar of European banking - became reality through a hastily arranged, government-brokered deal that sent shockwaves through global markets. Twelve months later, policymakers and regulators face uncomfortable questions about whether the rescue has actually exacerbated systemic risks in European banking.

At the heart of the debate lies the uncomfortable reality that UBS has now become what economists call a "super-SIFI" (super systemically important financial institution). The combined entity boasts a balance sheet approaching $1.7 trillion - roughly twice the size of Switzerland's entire GDP. This staggering scale has reignited longstanding concerns about institutions becoming "too big to fail" while simultaneously being too big to manage effectively.

"We've replaced one problem with an even bigger one," remarked a senior European Central Bank official who spoke on condition of anonymity. "Instead of having two banks that required careful supervision, we now have a single institution whose failure would be absolutely catastrophic for the continent's financial stability." This sentiment echoes quietly through regulatory circles from Frankfurt to Basel, where officials privately concede that the merged bank's sheer size creates new vulnerabilities.

The takeover's aftermath reveals troubling paradoxes. While intended to stabilize markets during last year's banking turmoil, the deal has actually concentrated risk in ways that make future crises potentially more dangerous. UBS now controls about one-third of Switzerland's domestic banking market and dominates key areas like wealth management. Such market share would typically trigger antitrust concerns in other industries, yet banking's unique systemic role forced regulators to overlook competition issues.

Market indicators tell their own story. Credit default swaps (CDS) on UBS debt - essentially insurance against default - trade at levels suggesting investors see the bank as slightly riskier than before the merger. This comes despite explicit government guarantees and a supposedly stronger combined balance sheet. "The market is pricing in the complexity risk," explained a London-based fixed income analyst. "Bigger isn't always safer when it comes to banks."

Perhaps most worryingly, the Swiss solution has set a precedent that some fear could encourage reckless behavior. By writing down $17 billion of Credit Suisse's Additional Tier 1 (AT1) bonds to zero while protecting shareholders - a reversal of traditional bankruptcy hierarchy - authorities upended established norms about who bears losses during failures. Though intended as a one-time emergency measure, this move has created lingering uncertainty about Europe's resolution framework.

The political fallout continues to reverberate. Swiss politicians have grown increasingly vocal about their discomfort with UBS's outsized influence. "We cannot allow our entire economy to depend on the health of a single bank," argued a member of Switzerland's finance committee during recent parliamentary hearings. Similar concerns are heard in Brussels, where EU officials worry about the implications of having national champions that dwarf many eurozone countries' economic output.

Regulators face a devilish dilemma. On one hand, breaking up megabanks risks destabilizing markets and destroying value. On the other, maintaining the status quo perpetuates moral hazard - the idea that these institutions will always be rescued, encouraging excessive risk-taking. "We're stuck between the rock of financial stability and the hard place of market discipline," admitted a Bank of England policymaker during a private seminar.

Behind closed doors, discussions are turning to whether Europe needs its own version of the U.S.'s Dodd-Frank Act provisions that theoretically allow for orderly wind-downs of giant banks. But such mechanisms remain untested for institutions of UBS's scale, and many doubt they would work during actual crises when markets panic. The uncomfortable truth is that no Western country has successfully demonstrated how to safely fail a globally systemic bank without triggering broader contagion.

Meanwhile, UBS executives insist they're making the merger work. Cost-cutting targets have been raised twice, with over 13,000 jobs already eliminated. The bank reports progress in integrating IT systems and risk controls - though insiders say the technological challenges remain immense. "This is a three-to-five year project, not a twelve-month sprint," cautioned a UBS board member during the bank's last earnings call.

Investors seem cautiously optimistic, with UBS shares recovering most of their post-merger losses. But the stock still trades below book value, suggesting markets continue to apply a "conglomerate discount" reflecting skepticism about whether the combined entity can deliver sustainable returns. Analysts particularly question whether UBS can maintain Credit Suisse's investment banking operations without recreating the same risk-taking culture that doomed its rival.

The human toll of the merger often gets overlooked in policy discussions. Beyond the thousands of layoffs, industry veterans describe a talent exodus as bankers flee what they see as an increasingly bureaucratic culture. "The best people don't want to work for a government-protected utility," commented a former Credit Suisse managing director now at a boutique firm. This brain drain could undermine the very stability regulators seek to protect.

Looking ahead, the most consequential impact of the UBS-Credit Suisse union may be how it reshapes thinking about bank size. For years after the 2008 crisis, regulators focused on making banks safer through higher capital requirements and stress tests. The Swiss emergency merger has abruptly shifted attention back to structural issues of scale and concentration that many thought had been settled.

As one veteran regulator put it: "We spent fifteen years building a fortress. Now we're realizing it might be a single-point-of-failure fortress." This realization is forcing uncomfortable conversations about whether Europe's banking system needs more radical reform - and whether politicians have the stomach for battles with financial giants that will inevitably resist such changes.

The ultimate irony? In trying to solve one "too big to fail" problem, European authorities may have created an even larger one. As the merged UBS continues digesting its acquisition, regulators across the continent are left grappling with a sobering question: In an era of banking consolidation, have we made the system safer or simply created bigger dominoes to watch nervously?

What remains clear is that the issues exposed by Credit Suisse's collapse and UBS's takeover won't fade with time. If anything, the challenges of supervising and potentially resolving megabanks have become more acute. As the financial world reflects on this one-year anniversary, few believe Europe has found satisfactory answers to questions that strike at the heart of modern capitalism's fragile architecture.