Sergio Ermotti, CEO of Swiss banking giant UBS, during the group’s annual general meeting on May 2, 2013 in Zurich.
Fabrice Coffrini | Afp | Getty Images
The strict new banking regulations in Switzerland create a “lose-lose situation”. UBS This could limit its potential to challenge the Wall Street giants, according to Beat Wittmann, partner at Zurich-based Porta Advisors.
In a 209-page plan released on Wednesday, the Swiss government proposed 22 measures aimed at tightening supervision of banks deemed “too big to fail,” a year after authorities were forced to cancel the emergency bailout of Credit Suisse to be brokered by UBS.
The government-backed takeover was the largest merger between two systemically important banks since the global financial crisis.
At $1.7 trillion, UBS’s balance sheet is now twice the country’s annual GDP, prompting increased scrutiny of safeguards around the Swiss banking sector and broader economy following the collapse of Credit Suisse.
Speaking to CNBC’s “Squawk Box Europe” on Thursday, Wittmann said Credit Suisse’s fall was “a completely self-inflicted and predictable failure of government policy, the central bank, the regulators and above all else.” [of the] Finance Minister.”
“Then, of course, Credit Suisse had a failed, unsustainable business model and incompetent leadership, and that all pointed to a continually falling share price and credit spreads.” [20]22, [which was] completely ignored because there is really no institutionalized know-how at the level of policymakers to monitor the capital markets, which is crucial in the case of the banking sector,” he added.
The report presented on Wednesday grants the Federal Financial Market Supervisory Authority additional powers, imposes capital surcharges and strengthens the financial position of subsidiaries – but does not recommend a “blanket increase” in capital requirements.
Wittman noted that the report does not help allay concerns about the ability of politicians and regulators to oversee banks while ensuring their global competitiveness, saying it creates “a lose-lose situation for the Swiss financial center and for UBS, which is not in a position to further develop this potential.”
He argued that if UBS wants to capitalize on its newfound size and finally challenge companies like these, regulatory reform should take precedence over tightening screws on the country’s largest banks Goldman Sachs, JP Morgan, Citigroup And Morgan Stanley – which have similarly sized balance sheets but trade at a much higher valuation.
“It depends on the regulatory level playing field. “It’s of course about competencies and then about the incentives and the regulatory framework, and the regulatory framework such as capital requirements is a task at a global level,” said Wittmann.
“It can’t be the case that Switzerland or another jurisdiction there prescribes very, very different rules and levels – that doesn’t make sense, then you can’t really compete.”
For UBS to optimize its potential, Wittmann argued that Switzerland’s regulatory system should be brought into line with those in Frankfurt, London and New York, but said Wednesday’s report “showed no willingness to implement relevant reforms” that protect This hurts the Swiss economy and taxpayers, but allows UBS to “keep up with global players and US valuations”.
“The track record of policymakers in Switzerland is that we have had three globally systemically important banks and now we have one left, and these cases were the direct result of inadequate regulation and enforcement of regulation,” he said.
“FINMA had all the legal background and tools to deal with the situation, but they didn’t apply them – that’s the point – and now we’re talking about fines and that sounds like a stupid thing to me.”
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2024-04-11 09:33:41
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