UBS mostly in agreement with tighter regulations

UBS CEO Sergio Ermotti spoke at the Swiss Media Forum on Thursday. Keystone/Urs Flueeler

The major Swiss bank UBS is in agreement with the majority of the measures proposed by the Swiss government last month to reform banking supervision.

“We would say we agree with 80% to 90% of these 22 measures,” said UBS Group CEO Sergio Ermotti at the SwissMediaForum event in Lucerne on Thursday. “There are a few points where we disagree.”  

The Swiss government wants to prevent another bank failure like that experienced by Credit Suisse with stricter rules for UBS and other institutions categorised as systemically important. In the more than 300-page paper on the so-called “too big to fail” regulations presented in April, the finance ministry recommends stricter capital requirements, among other things.

According to Finance Minister Karin Keller-Sutter, the new requirements could contribute to the Group needing an additional $15 billlion to $25 billion (CHF13.7 billion to 22.9CHF billion) in capital over the years. The government’s proposals have yet to be considered by parliament. 

UBS Chairman Colm Kelleher stated at the bank’s Annual General Meeting in April that he considered additional capital to be the wrong remedy. UBS had over 200 billion dollars in loss-absorbing capital. “There is enough capital,” he said on Thursday. 

 Ermotti: Today’s UBS “too big to fail” 

UBS in its current form is “too big to fail”. Due to its size and interconnectedness with the financial system and the economy, the bank cannot go bankrupt in a disorganised manner. UBS CEO Sergio Ermotti recognises this, as he said at the Swiss Media Forum in Lucerne on Thursday. 

Ermotti’s boss, Chairman of the Board of Directors Colm Kelleher, had stated at the Annual General Meeting at the end of April that he did not believe UBS was “too big to fail”. “The too-big-to-fail rules are misunderstood in the media,” added Ermotti. 

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Of course, today’s UBS is also too big to fail, he said in a podium discussion. Due to its size, it requires special regulation. 

“It must be structured in such a way that no state or taxpayer would have to rescue us if worst came to worst,” emphasised Ermotti. And a collapse of the bank must not have any consequences for the Swiss economy. “We are aware of our responsibility,” said the UBS head at the annual media conference. 

Largely in agreement with the Federal Council 

An emerging dispute between Ermotti and Swiss finance minister Karin Keller-Sutter was recently discussed in the media. The point of contention: the demands for stricter capital requirements for UBS. According to Keller-Sutter, UBS could have to build up additional capital in the amount of CHF15 to CHF25 billion. 

Ermotti did not address the question of equity capital, but tried to take the wind out of the sails somewhat: “We agree with 80 to 90% of the 22 measures proposed by the Federal Council in its ‘Too Big to Fail report’,” he said. 

The UBS boss pleaded in favour of “strong and credible” regulation. “But that does not mean that more regulation is automatically needed,” he said. Ermotti also commented on the role of financial market supervision in the downfall of Credit Suisse: “The bank had an inadequate business model – and was tolerated from all sides”, he said. 

Difficult decisions 

14 months have passed since the “emergency takeover” of Credit Suisse by UBS. And these 14 months were “not always easy”, said Ermotti. The most difficult decision he had to make was that of the job cuts. According to Ermotti, planning for the next two years will be extremely challenging. 

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Jobs had to be cut. There is no other way to achieve the targeted cost reduction. Around 3,000 jobs are to be proactively made redundant in 2025 and 2026 – after the integration of UBS and Credit Suisse has been completed. “This is the most difficult decision”, said Ermotti, “but it is necessary”. 

Adapted from German by DeepL/kc/amva

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