In a speech at the UBS Annual General Meeting, Chairman Colm Kelleher emphasized that the Swiss bank is “not too big to fail.” He highlighted the bank’s strong capitalization, sustainable business model, and low-risk balance sheet as factors that differentiate it from its competitors. Kelleher expressed concerns about ongoing discussions on additional capital requirements proposed by the Swiss government, arguing that such measures could negatively impact Switzerland’s competitiveness as a financial center and lead to regulatory fragmentation in Europe. He pointed to the recent collapse of Credit Suisse as evidence that regulatory solutions cannot fix a broken business model, stressing the importance of effective risk management and strong capital buffers.
Kelleher highlighted the increased strength of capital requirements for global systemically important banks since the 2007-08 financial crisis, with UBS’s own loss-absorbing capacity exceeding $200 billion. He stated that the robust regulatory framework in place has made the financial system much more resilient than before, reducing the likelihood of another crisis. The chairman underscored the importance of a proactive and prudent approach to risk management, noting that it is essential for banks to anticipate and address potential vulnerabilities in their operations.
The Swiss government recently proposed stricter capital requirements for UBS and three other major banks deemed “too big to fail.” While the specifics of these requirements were not disclosed, the government emphasized the need to strengthen the resilience of the financial system and safeguard the broader economy from potential instability. The move reflects a growing focus on preventing systemic risks and enhancing the stability of the banking sector, particularly in light of recent challenges faced by some prominent financial institutions.
The concept of banks being “too big to fail” has been a subject of debate since the financial crisis, with critics arguing that it incentivizes excessive risk-taking and moral hazard. By designating certain institutions as systemically important, governments implicitly signal their commitment to preventing their failure, which can lead to complacency and lax risk management practices. The Swiss government’s recommendations aim to strike a balance between supporting the stability of the financial system and preventing the negative consequences associated with banks having implicit government backing.
Kelleher’s remarks at the AGM underscored UBS’s commitment to prudent risk management, strong capitalization, and sustainable business practices. The bank’s resilience and focus on long-term value creation position it well to navigate challenges in the financial industry and support its stakeholders. As regulatory requirements evolve and governments seek to enhance the stability of the banking sector, UBS remains dedicated to upholding high standards of governance, risk management, and financial integrity. The ongoing dialogue between banks, regulators, and policymakers will continue to shape the regulatory landscape and influence the future of the financial system.
