The Federal Council has consistently opposed proposals to increase state intervention in the banking sector, particularly regarding UBS. The government is concerned about potential negative incentives and distortions in competition that could arise from such measures.
This situation highlights a timing inconsistency issue, where stakeholders are hesitant to take preemptive actions that they may later reconsider. Additionally, the state would face significant risks if it were to take control of a major global bank without the necessary management capabilities.
The debate on UBS's capital requirements has intensified, especially in light of the findings from the Parliamentary Investigation Committee (PUK) report. While some argue for stricter capital adequacy rules to protect taxpayers, there is no consensus on implementing these measures.
The PUK has only agreed on the need for transparency and a clear exit strategy when granting relief from standard regulations. This cautious approach reflects concerns about state guarantees for large financial institutions.
The narrative surrounding Credit Suisse has evolved since the merger with UBS was announced. Initially seen as a liquidity and confidence issue, the PUK report revealed that Credit Suisse would have failed to meet minimum capital requirements without special concessions from the Swiss Financial Market Supervisory Authority (Finma).
This has led to calls for stricter capital requirements for UBS. However, some argue that if Credit Suisse had adhered to existing capital standards, it would not have faced such dire circumstances.
The PUK has recommended enhancing the assertiveness of Finma and giving it the authority to impose fines on systemically important banks and individuals. They also support the Federal Council's proposal for a state liquidity guarantee for systemically important banks.
However, the question of whether these banks should pay an annual insurance premium for this safety net remains unresolved.
The PUK report has raised questions about the de facto state guarantee for UBS and the future of major global banks in Switzerland. The focus now is on mitigating risks for taxpayers while addressing the implications of the state guarantee.
The report highlights the inadequacies of the current regulatory framework and the lack of confidence in existing emergency protocols. This raises questions about the credibility of the emergency regime designed for resolving major banks.
As discussions continue, there will likely be debates over the balance between regulatory oversight and the operational autonomy of large banks. The PUK has recommended considering temporary nationalization of large banks, which could establish a quasi-official state guarantee.
The outcomes of these discussions will not only impact UBS and other systemically important banks but also influence the regulatory environment for financial institutions worldwide. The Federal Council is preparing to act on the lessons learned from the Credit Suisse situation, with high stakes for the banking sector and taxpayers.