Swiss Government Proposes Stricter Capital Requirements for Banks
Impact on UBS’s Growth Potential
ZURICH – The Swiss government’s proposed stricter capital requirements for the banking sector could hinder UBS’s expansion opportunities, according to the country’s finance minister. Karin Keller-Sutter expressed concerns about the potential implications of the regulatory changes on UBS’s growth prospects in an interview published on Saturday.
Proposed Regulatory Measures
If implemented, the regulatory package announced on Wednesday aims to increase the capital that Switzerland’s largest bank, UBS, must hold. This move is designed to prevent a recurrence of the Credit Suisse collapse. Keller-Sutter highlighted that the regulatory changes target the country’s four major banks with 22 measures and over 200 pages of recommendations to oversee those identified as “too big to fail” (TBTF).
Implementation Timeline
The Swiss government plans to swiftly enforce the measures and present two implementation packages by the first half of 2025. Among the proposed changes, Keller-Sutter emphasized the need for Swiss parent companies of UBS and other systemic banks to back their foreign holdings with up to 100% equity, a significant increase from the current 60% requirement.
Financial Impact on UBS
The heightened capital requirements could necessitate UBS to retain an additional $10 to $15 billion in excess capital compared to its current holdings. Keller-Sutter also criticized UBS CEO Sergio Ermotti’s substantial pay package, amounting to 14.4 million Swiss francs last year.
Enhanced Crisis Preparedness
The minister noted that the proposed changes would not only impact UBS’s growth trajectory but also improve the bank’s ability to engage with foreign authorities in times of crisis. By adjusting the regulations, Swiss banks aim to fortify their financial stability and resilience.
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“UBS is harming itself in this way,” Keller-Sutter remarked, underscoring the potential implications of the regulatory changes on the bank’s operations.
($1 = 0.9140 Swiss francs)
