UBS Chair Cautions Against Significant Rise in Capital Requirements, According to Newspaper Reports By Reuters

ZURICH – UBS Chair Colm Kelleher expressed concern on Sunday regarding the Swiss government’s intentions to tighten capital requirements for major banks, cautioning that such measures could undermine Switzerland’s status as a financial hub.

Earlier this year, the Swiss government outlined plans for stricter capital demands for UBS and the three other large banks in the country to enhance the financial sector’s resilience following the collapse of Credit Suisse last year.

In an article featured in a Swiss newspaper, Kelleher stated that he largely supported the 22 recommendations in the government’s report, with the exception of the stricter capital requirements. He voiced his apprehension, remarking, “What I really have a big problem with is the increase in capital requirements. It just doesn’t make sense,” in relation to the so-called “too-big-to-fail” report.

While specific details regarding the new capital requirements are still forthcoming, Finance Minister Karin Keller-Sutter mentioned in April that projections indicated UBS might need an additional $15 billion to $25 billion. Meanwhile, analysts at Autonomous Research suggested UBS could have to retain an extra $10 billion to $15 billion.

Kelleher refrained from discussing specific figures but warned that excessive capital demands could harm competitiveness and adversely affect pricing for banking products for consumers. He emphasized the importance of concentrating on vital issues such as liquidity management and ensuring the full resolvability of banks.

Swiss banks play a significant role in maintaining the country’s position as a leading financial center, managing approximately $2.6 trillion in international assets, according to a 2021 Deloitte study. However, competition is intensifying from locations like Luxembourg and particularly Singapore, which has experienced rapid growth.

Experts have raised alarms about the potential economic risks posed by UBS, which has a balance sheet twice the size of Switzerland’s annual economic output, should it face collapse. Kelleher, however, downplayed these threats, asserting that UBS possesses “significantly more” capital than comparable banks and noted that its business model, rooted in wealth management and the Swiss domestic market, is relatively low-risk.

Kelleher, who took on the chair role in 2022, reaffirmed UBS’s commitment to Switzerland, even if the government mandated a substantial increase in capital. He asserted, “Although we are a global bank, the heart of UBS is our Swissness,” and confirmed there was “no question” about the bank leaving its home country.

Nevertheless, he warned that a substantial rise in capital requirements would be unfavorable for Switzerland. “If politics forces us to massively increase our capital, then Switzerland has decided that it no longer wants to be a relevant international financial centre,” Kelleher stated, adding that such a decision would not be in the country’s best interest.

The former Morgan Stanley executive indicated his willingness to engage with the government regarding its proposals.