Sergio Ermotti, CEO of major Swiss bank UBS, attends the group’s annual general meeting in Zurich on May 2, 2013.
Fabrice Coffrini | AFP | Getty Images
Switzerland’s tough new banking regulations create a “lose-lose situation” for UBS, limiting its chances of competing with Wall Street giants, said Beat Wittmann, a partner at Zurich-based Porta Advisors. It is said that there is a possibility.
The Swiss government will tighten its grip on banks deemed “too big to fail” in a 209-page plan released Wednesday, a year after authorities were forced to broker an emergency bailout of Credit Suisse by UBS. It proposed 22 measures aimed at
The government-backed takeover was the largest merger between two systemically important banks since the global financial crisis.
UBS’s balance sheet now stands at $1.7 trillion, double Switzerland’s annual GDP, and the Credit Suisse collapse has prompted increased scrutiny of protections surrounding Switzerland’s banking sector and economy as a whole. .
Appearing on CNBC’s “Squawk Box Europe” on Thursday, Whitman said Credit Suisse’s collapse was “a completely self-inflicted and predictable failure of government policy, central banks, regulators, and above all… ” he said. [of the] Minister of Finance. ”
“Credit Suisse, of course, had a failed and unsustainable business model and incompetent leadership, all evidenced by a declining stock price and credit spreads across the company.” [20]twenty two, [which was] “There is no institutionalized know-how at the policymaker level to monitor the capital markets, which is essential in the case of the banking sector, so it is completely ignored,” he added.
Wednesday’s report gave the Swiss Financial Market Supervisor additional powers to apply capital premiums and strengthen the financial position of subsidiaries, but recommended a “full-scale increase” in capital requirements. I didn’t get to that point.
Whitman suggested that the report would do nothing to allay concerns about whether politicians and regulators could supervise banks while ensuring their global competitiveness, saying, “As a financial center, “This would create a lose-lose situation for Switzerland, where UBS would be unable to develop as a financial center.” potential. “
He believes that if UBS is to use its newfound scale to ultimately challenge the likes of Goldman Sachs, JPMorgan, Citigroup and Morgan Stanley, which all have similarly sized balance sheets, He argued that regulatory reform should be prioritized over tightening the screws on banks. But it trades at a much higher valuation.
“It comes down to the competitive conditions at the regulatory level. It’s of course a matter of capacity, and then it’s about incentives and the regulatory framework, and the regulatory framework, such as capital requirements, is a global challenge,” Whitman said. said.
“You can’t have Switzerland or any other jurisdiction imposing very different rules and levels. That doesn’t make sense. Then you can’t really compete.”
Wittmann argued that for UBS to reach its full potential, Switzerland’s regulatory system needed to be brought into line with those in Frankfurt, London and New York, but Wednesday’s report , said the bank has shown “no intention to undertake relevant reforms” to protect UBS. It would allow UBS to “catch up with global corporate and US valuations” while impacting the Swiss economy and taxpayers.
“The track record of Swiss policymakers is that while there are three globally systemically relevant banks and one remains, these incidents are directly attributable to poor regulation and regulatory enforcement,” he said. That was the result.”
“FINMA had all the legal background and tools in place to deal with the situation, but they didn’t apply it. That’s what matters. And now we’re talking about fines. , that sounds like Pennywise and Pound folly to me.”
