The Swiss government has suggested that UBS may need to find $27 billion in order to absorb potential losses and protect taxpayers from the need to bail out a major bank, following the failure of Credit Suisse the previous year. However, UBS has argued that its finances are strong and that requiring additional capital could harm Switzerland’s status as a global financial center. The bank’s chairman, Colm Kelleher, expressed concerns about the proposed regulations and emphasized that additional capital may not be the right remedy for the situation.
UBS’s acquisition of Credit Suisse last year in a government-orchestrated rescue has been controversial in Switzerland, as it has resulted in a bank with assets nearly double the size of the country’s annual economic output. Despite this, Kelleher defended the deal as reinforcing Switzerland’s position as a leader in wealth management. He highlighted that UBS is well-capitalized and not too big to fail, with resources to absorb significant losses. Kelleher also emphasized that trust cannot be regulated and that low capital requirements were not the reason for Credit Suisse’s troubles.
The regulatory proposals regarding additional capital for UBS have caused concern among analysts and shareholders, resulting in a decline in the bank’s stock price. Swiss finance minister Karin Keller-Keller Sutter suggested that estimates of between $16.4 billion and $27.3 billion for additional capital were plausible. Shareholders are worried about the impact of increased capital requirements on returns and earnings potential for the bank. However, Kelleher continued to support the benefits of the Credit Suisse deal while acknowledging that there is still work to be done to ensure its success.
The market valuation of UBS has risen significantly over the past year, with shares up more than 40%. However, this leaves the stock susceptible to volatility, particularly due to concerns about the integration of Credit Suisse and the impact of new regulatory proposals on the bank’s value. Kelleher reiterated the importance of the deal in terms of adding client assets and solidifying UBS’s position as a global wealth manager. He also defended CEO Sergio Ermotti’s pay package, citing Ermotti’s challenging role in the financial services industry and his successful performance. Ermotti’s 2023 pay of 14.4 million Swiss francs made him the highest-paid bank CEO in Europe.
