UBS Chief Slams Swiss Regulation Plans
UBS is currently finalizing its response to the Swiss government’s proposed regulatory reforms. The consultation process is expected to conclude in early September. At that point, UBS will also publicly defend its position, CEO Sergio Ermotti announced.
The proposed tightening of banking regulations would have a significant impact on UBS. According to CEO Sergio Ermotti, speaking on Wednesday during the bank’s half-year results presentation, UBS would be required to hold an additional $42 billion in CET1 capital under the new rules. This, he said, «neither reflects nor acknowledges the financial strength of the bank and is grossly disproportionate».
Strong Pushback Against Government Plans
Ermotti sharply criticized the government’s plans to tighten regulations for systemically important banks. He stated that the proposals are «not aligned with international standards» and fail to «recognize UBS's financial resilience».
In particular, the requirement for 100 percent capital backing of foreign subsidiaries «far exceeds what is appropriate», he said.
Consultation Response Nearing Completion
«It is our responsibility to contribute to this discussion», Ermotti noted during a call with analysts. «We are currently preparing our response to the consultation and will, in due course, publish parts of it and explain our position publicly».
«We are strong because of our global footprint, not despite it. We will actively participate in the debate over the future of Swiss regulatory requirements».
Breakdown of the $42 Billion Capital Requirement
UBS arrived at the $42 billion figure from several components. About $24 billion stems from the full capital backing requirement for its foreign subsidiaries.
The integration of Credit Suisse, as previously communicated, has already resulted in additional capital needs of roughly $18 billion to comply with existing regulations.
UBS Faces Much Higher Capital Requirements Than Peers
If the proposed changes are implemented, UBS would effectively be required to maintain a CET1 ratio of around 19 percent. After deductions for activated software, deferred tax assets (DTA), and regulatory valuation adjustments (PVA) of assets and liabilities, the ratio would still stand at approximately 17 percent.
These requirements are significantly higher than those faced by other global systemically important banks, whose average CET1 ratio is 10.9 percent. The proposed rules would not be aligned with international standards and would represent a departure from global norms.
Despite the potential impact, UBS has no plans to scale back its business or adjust its operations in anticipation of the new regulations, Ermotti affirmed.
