ZURICH • Credit Suisse Group and UBS Group are in talks about combining some back-office functions to cut costs, according to people with knowledge of the matter.

Switzerland's biggest banks - competitors in investment banking and wealth management - are in early-stage negotiations about cooperating in areas such as compliance, settlements and trade processing, the people said, asking not to be identified because the matter is private.

UBS chief executive officer Sergio Ermotti said as recently as last week that banks can no longer afford separate back-office functions because of tighter profit margins. His Credit Suisse counterpart, Mr Tidjane Thiam, said in 2016 that his firm was in talks with another lender he did not identify about sharing databases and servers.

"An increasing percentage of costs are influenced by compliance requirements," said Ms Michele Hess, a partner in regulatory and compliance at PwC in Zurich.

"Banks are hiring more staff and there is heavy investment in technology planned or taking place," she added, as lenders respond to the European Union's overhaul of market rules, known as MiFID II, and the Swiss regulator puts emphasis on anti-money laundering and cross-border tax issues.

A cost-sharing deal between the country's top banks could set a precedent for other firms to revive efforts to work together.

BLOOMBERG