(Bloomberg) – Swiss Finance Minister Karin Keller-Sutter’s proposal to permanently limit the size of UBS Group AG’s investment banking, suggesting it won’t change her thinking about future capital needs.
Keller-Sutter said in a Bloomberg interview in Warsaw on Friday, under the watchful eyes of an EU conference in Warsaw that any such move was a “business decision” by UBS. “This is not a political decision.”
According to Bloomberg News, UBS has privately recommended that the upper limit of the bank’s investment banking sector be written into Swiss law. Stefan Walter, CEO of financial regulator Finma, then confirmed the proposal and welcomed it.
The proposal shows differences between UBS and the Swiss government, including Keller-Sutter’s advancement in the country’s plan to increase capital needs by as much as $25 billion.
The authorities’ intention is to increase UBS’ resilience and make it bigger after agreeing to take over Credit Suisse two years ago. The expanded capital buffer could reduce the risk of a crisis facing UBS, which could lead to financial chaos in Switzerland.
However, UBS has been working to oppose the idea, saying it will reduce its competitiveness and may lower investor spending. Bloomberg News reported that lenders were very frustrated and even looked at potential relocations of their headquarters.
One argument made by UBS is that new capital requirements, including higher demands for foreign subsidiaries, cannot solve the root cause of Credit Suisse’s collapse. It has nailed the former bank’s management incompetence.
Keller-Sutter appears to have responded to these arguments in an interview Friday.
“We do learn the lessons from the failure of Credit Suisse and have done a lot of analysis on the causes of the failure,” she said. “Of course, it’s mismanagement, but it’s also a lack of capital, especially abroad.”
“That’s the problem we’re solving,” she said.
The Swiss government will propose a series of proposals in June that will address the capital UBS should hold, including its foreign subsidiaries. The matter will then be brought up by the Swiss Parliament and concluded by 2028.
– With the assistance of Arno Schütze, Max Ramsay and Zoe Schneeweiss.
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