Former Swiss Private Banker Proposes Bold UBS Breakup
He rarely speaks out these days. Having handed over his private bank to his son and now well into his 80s, Karl Reichmuth usually keeps a low profile. But when it comes to UBS and Switzerland’s unresolved «too big to fail» dilemma, he refuses to stay silent.
Following its takeover of Credit Suisse, UBS has grown into an even more dominant financial player, viewed by many as enjoying an implicit state guarantee – a subsidy of sorts. To mitigate the systemic risk this presents, the Swiss government plans to tighten Too Big To Fail (TBTF) legislation, primarily by increasing capital requirements.
Karl Reichmuth, speaking on behalf of a group of respected finance professionals (who have chosen to remain unnamed), offers a different solution: split UBS’s investment banking division from the rest of the group and relocate it abroad. «I’m concerned about foreign influence, which could ultimately undermine our national sovereignty,» he warns.
His main concern is that UBS, as a disproportionately large institution for a small country like Switzerland, effectively puts every taxpayer on the hook in the event of a crisis. «The saying ‘Bürgen tut würgen’ takes on a special meaning due to UBS’s size,» he says, referring to the German proverb about the pain of guaranteeing others’ debts.
Speaking as a Citizen, Not a Banker
Asked whether his views are shaped by his background as a private banker who was personally liable, Reichmuth responds: «First and foremost, I’m speaking as a citizen. I’m troubled when decision-makers are not held accountable. The risk to taxpayers is enormous, and the growing influence of foreign stakeholders – given much of UBS’s equity is held outside Switzerland – is deeply concerning.»
Nevertheless, he concedes that UBS is currently well-positioned in terms of leadership. «I would like to see its value-creating activities remain anchored in Switzerland,» he adds.
More Capital? Not the Only Answer
Reichmuth is skeptical of the government’s plan to increase capital buffers: «Excessively high capital requirements can hurt a globally competitive institution. UBS is right to try to communicate the trade-offs, but it should also take the initiative to propose its own solutions.»
One such proposal? A radical organizational shift.
Split and Relocate Investment Banking
Reichmuth and his associates propose that UBS spin off its capital-intensive investment banking business and domicile it in a global financial hub such as London or New York – places, he says, that offer the right environment and culture for that type of activity.
«Investment banking, done well, is far more profitable than traditional deposit and lending operations. Meanwhile, in wealth management, UBS already stands as the second-largest global player after BlackRock, benefiting from Switzerland’s strong reputation for reliability.»
A Blueprint for Separation
How would this separation work in practice? Reichmuth suggests a share split modeled on Holcim’s recent spinoff of Amrize. «Instead of the US unit, UBS could spin off its investment banking division. Shareholders could choose whether to become investors in the newly independent investment bank.»
He argues that most of the relevant expertise is already abroad. «Most capital markets specialists and investment banking staff are based in London anyway. Swiss clients would still have access to their services via the Swiss booking office.»
Weighing Tax Losses vs. Global Competitiveness
Would relocating the investment bank mean lower tax revenues for Switzerland? «Yes, that’s a downside, especially for Zurich,» Reichmuth admits. «But if excessive regulation makes UBS uncompetitive, we risk losing even more tax revenue.»
Past discussions about splitting off high-risk divisions in Swiss and European banks have always been shelved in favor of the «one-stop shop» model. Isn’t that still a valid argument?
A Chance to Rein in Regulation
Reichmuth believes UBS’s scale makes this a special case. «This proposal deserves serious consideration. It’s a drastic step, but it could also create the space to reduce political interference and regulation in the financial sector.»
By restoring the link between decision and liability, he says, Switzerland could move toward a more market-driven economy – «to the benefit of individuals and the Swiss public.»
Born in 1939, Karl Reichmuth founded the private bank Reichmuth & Co in Lucerne in 1996, where he now serves as Honorary Chairman. He also founded RealUnit, an investment vehicle designed to preserve purchasing power through tangible assets. His financial career began in 1958 at Schweizerische Kreditanstalt (now Credit Suisse), with postings in Geneva, London, New York, and Chiasso. He later served on the Executive Board of Luzerner Kantonalbank for a decade. But as he revealed to finews.ch, his very first job was far from finance: he worked as a cheesemaker – out of family necessity.
