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SVP lawmaker proposes capping UBS investment bank at 30%
of
total business
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UBS faces stricter rules after acquiring Credit Suisse
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Critics doubt 30% cap will enhance banking safety
By Ariane Luthi
ZURICH, March 26 (Reuters) - One of Switzerland's main
political parties could soon propose capping UBS's
investment banking activities as part of a regulatory overhaul
aimed at making the sector less risky, a senior lawmaker said on
Wednesday.
The right-wing Swiss People's Party (SVP), the biggest group
in parliament, would pitch the plan as soon as possible if the
government proposed that UBS fully capitalize its foreign units,
SVP lawmaker Thomas Matter said.
Limiting the investment bank could be a way of reducing the
amount of extra capital UBS would need to hold, he said.
"I will propose that investment banking may account for a
maximum of 30% of the total business of a systemically important
bank and that the business areas are taken into account in the
risk weighting," Matter told Reuters.
Reuters reported this week that UBS has floated the idea of
capping the size of its investment bank as one concession it is
considering to try to reduce the amount of capital it might have
to stump up under government proposals now expected in early
June.
Responding to that report, a UBS spokesperson said on
Tuesday it supported in principle the government's efforts to
strengthen financial stability provided they did not put
disproportionate burdens on the institution.
UBS has been facing tougher regulation since it acquired
Credit Suisse after its old rival collapsed in 2023, leaving
Switzerland with just one major global bank.
The enlarged bank has a balance sheet bigger than the Swiss
economy and authorities want to avoid another meltdown by
imposing stricter rules. These focus on the amount of capital
UBS must hold to contain the potential risk to taxpayers.
Financial market regulator FINMA and the Swiss National Bank
have backed making UBS fully capitalize its foreign units.
UBS CEO Sergio Ermotti has pushed back against saddling the
bank with a heavier capital burden. He argues the lender is
already well capitalized and that excessive regulation would put
both UBS and Switzerland at a disadvantage.
Matter said that while UBS is "much safer than it was before
the financial crisis", the new legislation would need to be
effective well beyond Ermotti's tenure at the bank to ward
against potential mismanagement in the future.
Excluding non-core and legacy assets, the investment bank
accounted for about 21% of UBS's risk-weighted assets at
end-2024, which would still allow some room for growth.
But the division accounted for nearly two-thirds of such
assets in 2008, when UBS needed a government bailout, an
experience that weighs on Swiss public debate about regulation.
Some critics of the power UBS wields in Switzerland are
sceptical that a 30% cap on its investment bank would do much to
make the banking landscape significantly safer.
"I don't think much of limiting investment bank activities
instead of ensuring adequate capital backing for the parent
firm," said Aymo Brunetti, economics professor at the University
of Bern. "Nobody knows where the risks will be in the future."
As debate continues on how far the new regulations should
go, the finance ministry said it is planning a cost-benefit
analysis of higher capital requirements on UBS.