Swiss banking plan leaves ‘relieved’ UBS out of immediate firing line
UBS could take years to feel the bite of new regulations after the Swiss government set out plans aimed at keeping the “monster bank” in line that were light on detail and heralded a tortuous political process to enshrine them in law.
Shares in the Zurichbased lender took a knock on Wednesday after the Finance Ministry said its “too big to fail” recommendations envisaged tougher capital requirements for UBS and other systemically important banks following the rescue of its stricken rival Credit Suisse in 2023.
But the government left open the precise impact it expected from the plan and analysts said there was little likely to cause UBS great alarm in the pledges to strengthen the market watchdog FINMA, monitor excessive pay and improve backstops. “The measures proposed by the Federal Council are not enough to finally regulate the banking sector effectively,” said Cedric Wermuth, coleader of the centreleft Social Democrats (SP), the secondbiggest party in the Swiss parliament.
“The decision not to introduce stricter capital adequacy criteria is completely negligent and makes a mockery of taxpayers who will have to foot the bill,” he added.
GOVT’S RESPONSE
Switzerland said that capital demands could be adjusted to reflect exposure to international subsidiaries, as well as lenders’ governance, complexity and profitability, without setting specific thresholds.
The government said it was “difficult to reach a final judgement on the exact impact” of its mooted higher capital requirements, but argued Swiss banking would benefit.
“The Federal Council is convinced that the report presented today points the way to a significant improvement,” Finance Minister Karin KellerSutter told a press conference.
Still, a person familiar with UBS’s thinking said the bank was “relieved” by the plan set out and hoped to lobby for less stringent terms during the unfolding political process.
UBS declined comment.
A person familiar with the government’s thinking said legislative changes would not be implemented before 2026 and the back and forth of politics in Switzerland meant that whatever finally passed might not have any effect on UBS until later. The measures were not intended to to be a major shakeup, but a series of steps aimed at putting more safeguards in place to reduce risk in the banking sector, the person said.