UBS Chair Warns on Capital Requirements

ZURICH (Reuters) – On Sunday, UBS Chair Colm Kelleher cautioned that the Swiss government’s plans to enhance capital requirements for major banks could undermine Switzerland’s status as a financial hub.

Earlier this year, the government proposed tougher capital requirements for UBS and three other large banks to bolster the financial sector following the Credit Suisse collapse last year.

In an article for the Swiss newspaper SonntagsBlick, Kelleher expressed agreement with most of the 22 recommendations in the government report but objected to stricter capital requirements, calling them illogical in the context of the “too-big-to-fail” report.

Although the specific capital requirements are yet to be disclosed, Finance Minister Karin Keller-Sutter previously indicated estimates that UBS might need an additional $15 billion to $25 billion are “plausible”. Analysts from Autonomous Research suggested UBS may need to retain an extra $10 billion to $15 billion.

Kelleher did not comment specifically on these figures but warned that excessive capital mandates could harm competitiveness and result in less favorable banking product pricing for customers.

He proposed that focus should shift to key issues like liquidity management and ensuring a bank’s full resolvability.

Swiss banks play a crucial role in maintaining the country’s standing as the world’s leading financial center, managing roughly $2.6 trillion in international assets as per a 2021 Deloitte study. However, competition is growing from Luxembourg and rapidly advancing Singapore.

Experts have noted that UBS, with a balance sheet double that of Switzerland’s annual economic output, could pose significant risks to the Swiss economy if it collapses. Kelleher minimized these risks, highlighting that UBS possesses “significantly more” capital than other banks and has a low-risk business model focused on wealth management and the domestic market.

Kelleher, who has chaired UBS since 2022, affirmed the bank’s commitment to Switzerland, even if significant capital increases are demanded. He stated, “Although we are a global bank, the heart of UBS is our Swissness,” asserting there is “no question” that UBS would not exit Switzerland.

However, he reiterated that if the bank is forced to significantly raise its capital, it would signal Switzerland’s desire to step away from its role as a relevant international finance center, which he argued isn’t in the nation’s interest. Kelleher indicated his readiness to discuss these proposals with the government.