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UBS ‘seriously concerned’ by Swiss capital proposals, says chair Colm Kelleher

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UBS chair Colm Kelleher has said the bank is “seriously concerned” about proposed new Swiss financial rules that would significantly increase its capital requirements.

Speaking at the lender’s annual general meeting in Basel on Wednesday, Kelleher argued that holding additional capital would put Swiss banks at a disadvantage to US and Asian competitors.

“Let me be clear: we are seriously concerned about some of the discussions related to additional capital requirements,” Kelleher said. “Additional capital is the wrong remedy.”

Swiss banking rules have come into sharp focus since the collapse of Credit Suisse last March and its rescue by UBS.

The government has proposed a range of measures to strengthen its banking system, including giving more power to financial regulator Finma, but it is the proposal to increase capital requirements that has caused the most angst at the largest lenders. 

During his speech at the bank’s AGM, UBS chief executive Sergio Ermotti said he agreed with Kelleher’s view on capital needs and said it was a “source of great concern” that the bank was perceived to enjoy an “implicit state guarantee” after it took over Credit Suisse.

UBS shares have dropped 12 per cent since the Swiss Federal Council published its report this month into the failings of Credit Suisse and proposals on how to improve the system.

The package of proposals in the Report on Banking Stability, which is expected to be signed into law next year, includes a recommendation that banks with international subsidiaries hold additional capital.

While the report was not explicit about how the capital requirements would be calculated, analysts have predicted that a change in the rules could lead to between $15bn and $25bn of additional capital for UBS.

Last week, Swiss finance minister Karin Keller-Sutter said the analyst estimates were “plausible”.

Kelleher said effective loss-absorbing capital within the banking sector had increased around 20 times since the global financial crisis, and UBS held more than $200bn.

He said that the financial sector was “a pivotal driver of growth and prosperity in Switzerland”.

“However, to maintain this competitive edge, it is imperative that our regulatory policies ensure a level playing field,” he said. “Switzerland’s regulation must remain broadly aligned with global standards.” 

He added: “While the US and Asia attract capital through effective regulation, the lack of deep capital markets in Europe poses challenges for both its economy and banks.”

Additional capital requirements have become a concern for banks around the world as the final iteration of the post-financial crisis Basel rules are set to be implemented in the coming year.

US banks were set to be hit hardest, but a fierce lobbying effort against the Basel III or Endgame measures has led to less onerous requirements.

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