Switzerland’s new banking regulations, aimed at tightening oversight of banks deemed “too big to fail,” may limit UBS’s ability to challenge Wall Street giants, according to Beat Wittmann of Porta Advisors. UBS’s balance sheet now exceeds the country’s annual GDP, prompting increased scrutiny of the Swiss banking sector and broader economy following the previous collapse of Credit Suisse. Wittmann criticized the government for failing to prevent the failure of Credit Suisse, attributing it to a failed business model and incompetent leadership that went unchecked by regulators.
The Swiss government’s plan involves giving additional powers to authorities, applying capital surcharges, and fortifying the financial position of subsidiaries, but stops short of recommending a blanket increase in capital requirements. Wittmann believes that these measures create a lose-lose situation for both Switzerland as a financial center and UBS, hindering the latter’s potential for growth and competition with global banks such as Goldman Sachs and JPMorgan. He argues that regulatory reform should take precedence over tightening regulations on large banks if UBS is to leverage its increased scale and challenge its competitors effectively.
Wittmann emphasizes the importance of creating a level playing field in regulatory environments to allow UBS to compete globally. He suggests that the Swiss regulatory regime should align with that in Frankfurt, London, and New York to enable UBS to catch up to its peers in terms of valuation and competitiveness. However, he criticizes the lack of will from Swiss policymakers to engage in meaningful reforms that would protect the Swiss economy and taxpayers while allowing UBS to maximize its potential.
According to Wittmann, the history of regulatory failures in Switzerland has led to the loss of global systemically important banks, leaving only one remaining. He argues that these failures were a direct result of insufficient regulation and enforcement, pointing to FINMA’s failure to address issues despite having the necessary legal framework. Wittmann is critical of the focus on fines for non-compliance, seeing it as a short-term fix rather than addressing the underlying regulatory issues that led to the failures of Swiss banks in the past.
Overall, Wittmann believes that Switzerland’s regulatory framework needs significant reforms to enable UBS to compete effectively on a global scale. He argues that aligning Swiss regulations with those in other financial hubs is necessary for UBS to capitalize on its potential and challenge Wall Street giants. He urges policymakers to prioritize regulatory reform and enforcement to prevent future failures in the Swiss banking sector and ensure the country’s continued competitiveness in the global financial landscape.
