Switzerland could lose wealth crown to Hong Kong, UBS chief warns

Ermotti warns against uninformed, populist fear-mongering. Keystone / Laurent Gillieron

UBS chief executive Sergio Ermotti has warned that Switzerland risks being overtaken as the world’s wealth management hub if policymakers overreact to the fall of Credit Suisse. 

Ermotti, who was drafted back in as head of Switzerland’s biggest lender just days after it rescued its former rival last year, said the country needed its banks to be able to compete globally.

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“Hong Kong, Singapore and the US are aggressively competing, and making great progress, for the offshore wealth management crown that Switzerland holds today,” he said during a speech at Lucerne university on Tuesday evening.

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“We cannot be complacent and pretend that having just local banks compete fiercely domestically will be sufficient.”

Fractious debate

Ermotti and UBS have become involved in an increasingly fractious debate with Swiss authorities in the aftermath of Credit Suisse’s collapse over the future direction of financial reform in the country.

The main sticking point between the two sides is whether banks with international subsidiaries should be required to hold additional capital, a measure proposed this year by the Swiss treasury department in a move that would mainly affect UBS.

Analysts predicted that the rule change could lead to between $15 billion and $25 billion of additional capital requirements for UBS, with finance minister Karin Keller-Sutter indicating that the estimates were “plausible”.

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Ermotti and UBS chair Colm Kelleher have previously spoken out against the need for additional capital. They have also rejected criticism that the combined UBS and Credit Suisse is too big for the Swiss economy.

Swiss fear-mongering

“There are too many uninformed, populist and fear-mongering voices in the media, politics and academia, including here at this university, focused exclusively on the danger of having a large bank based in our country,” Ermotti said in Lucerne.

During his speech, Ermotti displayed a slide that showed Hong Kong’s wealth management sector was expanding at a compound annual growth rate of 7.6% to and was set to overtake Switzerland by 2027, while Singapore’s was growing at 9% and was on course to be in third place.

“Foreign financial centres would benefit if Switzerland were to restrict its ability to maintain a leading presence abroad,” said Ermotti. 

“To maintain Switzerland’s lead, the nation’s financial and industrial ecosystem must include a globally relevant participant. Today that is UBS.”

During the speech, Ermotti drew on the life of Credit Suisse founder Alfred Escher as an example of an entrepreneur who took calculated risks, in the first time he has sought to claim the 19th-century industrialist for UBS.

Copyright The Financial Times Limited 2024