Swiss Finance Minister Karin Keller-Sutter has emphasized that UBS's capital requirements will depend on the bank's resolvability, as the Swiss government considers new stability measures.
These measures are part of a broader initiative aimed at preventing banking collapses similar to the one that led to the downfall of Credit Suisse last year. UBS, which acquired Credit Suisse following its failure, is now facing increased scrutiny as critics label it a "monster bank," raising concerns about its potential impact on the economy should it encounter difficulties.
The Swiss government is currently deliberating on a series of "too big to fail" proposals, which were outlined in April. These proposals are designed to ensure that large financial institutions maintain adequate capital levels to withstand economic shocks. Keller-Sutter noted that the adequacy of capitalization for UBS's foreign subsidiaries, particularly in the United States and Britain, is still under review. The minister refrained from specifying whether capital backing for these units should be closer to 60% or 100%, indicating that the decision will depend on UBS's overall resolvability.
Keller-Sutter highlighted that the capital requirements for UBS will not only be influenced by its size but also by progressive components that will increase in response to the bank's scale. She pointed out that other countries have already implemented capital requirements exceeding 60%, suggesting that Switzerland is catching up in this regard. The minister also mentioned that stress tests will play a role in determining additional capital requirements, emphasizing the need for a comprehensive approach to financial stability.
In the event of another financial crisis, liquidity will be a critical concern, according to Keller-Sutter. UBS has expressed resistance to the idea of higher capital requirements, arguing that such measures could adversely affect its business operations. The minister acknowledged the challenge of striking a balance between maintaining the competitiveness of the financial sector and ensuring its stability, a sentiment that resonates with many stakeholders in the industry.
When questioned about the issue of executive compensation at UBS, Keller-Sutter maintained that authorities should not interfere in salary determinations. However, she did express support for creating mechanisms that would allow for compensation clawbacks, indicating a desire for greater accountability among bank executives. The possibility of imposing a cap on bankers' salaries is also on the table, with Keller-Sutter suggesting that such a measure could gain approval through a referendum, reflecting Switzerland's system of direct democracy.
The minister did not rule out the potential for the Swiss financial market regulator, FINMA, to be granted the authority to impose fines on banks. She noted that the introduction of a senior manager regime and the imposition of fines have garnered significant support in parliament, indicating a shift towards more stringent regulatory oversight in the financial sector. This move could signal a broader trend of increasing accountability and transparency within the banking industry, particularly in the wake of recent financial turmoil.
As the Swiss authorities continue to navigate the complexities of banking regulation, the focus remains on ensuring that institutions like UBS are adequately capitalized and prepared for potential crises. The ongoing discussions surrounding capital requirements, executive compensation, and regulatory oversight will play a crucial role in shaping the future of Switzerland's financial landscape.