New capital standards will slow UBS growth

Tall order: A pedestrian passes a UBS Group branch in Zurich, Switzerland. The bank might in future have to back its foreign holdings with up to 100% equity, up from 60% at present. — Bloomberg

ZURICH: The Swiss government’s proposed tougher capital requirements for the banking industry will impact UBS’s ability to grow, the country’s finance minister has said in an interview.

Switzerland’s largest bank will have to hold more capital if the regulatory package, announced last Wednesday to prevent a repeat of the collapse of Credit Suisse, is implemented, Karin Keller-Sutter told Aargauer Zeitung.

“In short, growth will become more expensive,” she said.

The proposed changes target the country’s four largest banks with 22 measures and more than 200 pages of recommendations on how to police those deemed “too big to fail”.

The government aims to put the measures into effect quickly and present two packages for implementation in the first half of 2025.

Of the measures, Keller-Sutter highlighted the proposal to change how Swiss parent companies of UBS and the country’s other systemic banks must in future back their foreign holdings with up to 100% equity, up from 60% at present.

“If we adjust this regulation now, it will have consequences for the growth and size of UBS,” she said.

The requirement would also make it easier to deal with authorities abroad in the event of a crisis, she added.

According to an analyst estimate UBS might need to retain US$10bil to US$15bil in excess capital, compared to what it currently holds.

In the interview, Keller-Sutter again criticised UBS chief executive officer Sergio Ermotti’s pay package, which last year amounted to 14.4 million Swiss francs (US$15.75mil). “UBS is harming itself in this way,” she said.

Keller-Sutter had said she would have had to work for 30 years to earn the equivalent of Ermotti, who became Europe’s highest paid banker last year with the package.

“I cannot comprehend certain sums,” said Keller-Sutter, who earns 473,000 Swiss francs a year as a member of the Swiss cabinet, according to the government.

“I may be a bit old-fashioned, but as a child I once learned that the measure of all things is the salary of a federal councillor,” she added. “Well, that hasn’t been the measure of all things for a long time, has it?” — Reuters