UBS chairman warns of sharp rise in capital requirements, newspaper reports

ZURICH, Sept 29 (Reuters) – UBS (UBSG.S) Chairman Colm Kelleher warned on Sunday that the Swiss government’s plans to raise capital requirements for big banks could damage the country’s status as a financial centre.

Earlier this year, the government presented plans to tighten capital requirements for UBS and the other three biggest Swiss banks to boost the health of the financial sector after Credit Suisse’s collapse last year.

Writing in Swiss newspaper Sonntagsblick, Kelleher said he agreed with most of the government’s 22 recommendations, except for the proposal to tighten capital requirements.

“The really big issue for me is the rise in capital requirements. The so-called ‘too big to fail’ report makes no sense to me,” he said. Details of the exact capital requirement have yet to be released, but Finance Minister Karin Keller-Sutter said in April that estimates that UBS will need an additional $15 billion to $25 billion are “plausible.”

Analysts at Autonomous Research said in a separate estimate that UBS may need to set aside another $10 billion to $15 billion.

Kelleher declined to comment on figures, but said excessive capital requirements would hurt competitiveness and lead to less favorable pricing of banking products for clients.

“We should be focusing on more important issues, such as liquidity management and, above all, the full resolvability of banks,” Kelleher told the paper.

Swiss banks manage around $2.6 trillion in international assets, contributing to their role as one of the world’s leading financial centers, according to a 2021 Deloitte study. But competition is intensifying, especially from Luxembourg and especially from Singapore, which has grown significantly in recent years.

Experts have warned that the collapse of UBS, whose total assets amount to twice Switzerland’s annual economic output, poses a major risk to the Swiss economy.

Kelleher downplayed the risks, saying that while UBS has “considerably more” capital than comparable banks, the bank’s business model based on asset management and the Swiss domestic market means it’s less risky.

Kelleher, who will take over as president from 2022, said UBS would remain loyal to Switzerland even if Bern demanded a major capital increase.

“We are a global bank, but at the core of UBS is its Swiss identity,” he said, adding that there was “no question” the bank would leave its home country. But he warned that a capital increase by banks would be harmful to Switzerland.

“If politics were to force a significant capital increase, it would mean that Switzerland has decided that it no longer wants to be a relevant international financial centre,” Kelleher said.

“I don’t think this is in the country’s interest.”

A former Morgan Stanley (MS.N) executive said he was open to discussing the government’s proposals with the government, Opens in a new tab.