Sergio Ermotti, CEO of Swiss banking big UBS, through the group’s annual shareholders assembly in Zurich on Might 2, 2013.
Fabrice Coffrini | Afp | Getty Pictures
Switzerland’s powerful new banking laws create a “lose-lose state of affairs” for UBS and should restrict its potential to problem Wall Avenue giants, in keeping with Beat Wittmann, accomplice at Zurich-based Porta Advisors.
In a 209-page plan printed Wednesday, the Swiss authorities proposed 22 measures geared toward tightening its policing of banks deemed “too large to fail,” a yr after authorities had been compelled to dealer the emergency rescue of Credit score Suisse by UBS.
The federal government-backed takeover was the most important merger of two systemically vital banks for the reason that World Monetary Disaster.
At $1.7 trillion, the UBS stability sheet is now double the nation’s annual GDP, prompting enhanced scrutiny of the protections surrounding the Swiss banking sector and the broader economic system within the wake of the Credit score Suisse collapse.
Chatting with CNBC’s “Squawk Field Europe” on Thursday, Wittmann mentioned that the autumn of Credit score Suisse was “a wholly self-inflicted and predictable failure of presidency coverage, central financial institution, regulator, and above all [of the] finance minister.”
“Then after all Credit score Suisse had a failed, unsustainable enterprise mannequin and an incompetent management, and it was all indicated by an ever-falling share worth and by the credit score spreads all through [20]22, [which was] fully ignored as a result of there is no such thing as a institutionalized know-how on the policymaker ranges, actually, to observe capital markets, which is crucial within the case of the banking sector,” he added.
The Wednesday report floated giving extra powers to the Swiss Monetary Market Supervisory Authority, making use of capital surcharges and fortifying the monetary place of subsidiaries — however stopped wanting recommending a “blanket enhance” in capital necessities.
Wittman steered the report does nothing to assuage issues in regards to the potential of politicians and regulators to supervise banks whereas guaranteeing their world competitiveness, saying it “creates a lose-lose state of affairs for Switzerland as a monetary heart and for UBS not to have the ability to develop its potential.”
He argued that regulatory reform ought to be prioritized over tightening the screws on the nation’s largest banks, if UBS is to capitalize on its newfound scale and eventually problem the likes of Goldman Sachs, JPMorgan, Citigroup and Morgan Stanley — which have equally sized stability sheets, however commerce at s a lot greater valuation.
“It comes right down to the regulatory stage enjoying subject. It is about competences after all after which in regards to the incentives and the regulatory framework, and the regulatory framework like capital necessities is a worldwide stage train,” Wittmann mentioned.
“It can’t be that Switzerland or every other jurisdiction is imposing very, very completely different guidelines and ranges there — that does not make any sense, then you definately can not actually compete.”
To ensure that UBS to optimize its potential, Wittmann argued that the Swiss regulatory regime ought to come into line with that in Frankfurt, London and New York, however mentioned that the Wednesday report confirmed “no will to have interaction in any related reforms” that will defend the Swiss economic system and taxpayers, however allow UBS to “catch as much as world gamers and U.S. valuations.”
“The monitor report of the policymakers in Switzerland is that we had three world systemically related banks, and we’ve now one left, and these instances had been the direct results of inadequate regulation and the enforcement of the regulation,” he mentioned.
“FINMA had all of the authorized backdrop, the devices in place to deal with the state of affairs however they did not apply it — that is the purpose — and now we discuss fines, and that seems like pennywise and pound silly to me.”
