Switzerland's strict new banking rules create a “win-win situation” for UBS and could limit its potential to challenge Wall Street giants. So says Beat Wittmann, a partner at Zurich-based Porta Advisors, reports CNBC.
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In a 209-page plan published on Wednesday, the Swiss government proposed 22 measures aimed at strengthening control over banks considered “too big to fail.”
This comes a year after authorities forced to mediate the emergency rescue of Credit Suisse through UBS. The government-backed takeover was the biggest merger of two systemically important banks since the global financial crisis.
At $1.7 trillion, UBS's balance sheet is now twice the country's annual GDP, prompting increased scrutiny to protect the Swiss banking sector and the broader economy following the collapse of Credit Suisse.
Speaking to CNBC, Wittmann said the fall Credit Suisse was “a completely self-inflicted and alleged failure of government policy, the central bank, the regulator and, above all, the finance minister.”
“Credit Suisse then, of course, had a failed, unviable business model and incompetent management, all of which was highlighted by the continued and ignored persistent decline in share price and credit spreads throughout 2022,” he added.
In The new banking rules are about granting additional powers to the Swiss authority to supervise financial markets, apply capital surcharges and strengthen the financial position of subsidiaries.
Wittmann suggested the report did not allay concerns about the ability of policymakers and regulators to keep an eye on banks while ensuring their global competitiveness.
He said it “creates a win-win situation for Switzerland as a financial center, but UBS will not be able to develop your potential.”
He argues that regulatory reform must be a priority, and should not tighten the screws on the country's largest banks, if UBS is to benefit from its new scale and finally challenge US banks Goldman Sachs, JPMorgan, Citigroup and Morgan Stanley, which have the same size balance sheets. but are trading at a significantly higher valuation.
In order for UBS to optimize its potential, Wittmann argued that the Swiss regulatory regime should match that of Frankfurt, London and New York.
When In this regard, he noted that the new banking rules showed a “lack of willingness to engage in any relevant reforms” that would protect the Swiss economy and taxpayers, but would allow UBS to “catch up with global players and US valuations.”
“Track record The list of politicians in Switzerland shows that we had three global systemically relevant banks, and now we have one left, and these cases were a direct result of insufficient regulation,” Wittmann said.
Recall
The Ministry of Finance wrote that in June 2023, UBS Group completed an agreement to acquire former competitor Credit Suisse, completing the largest merger in the banking sector since the 2008 financial crisis.