The Swiss Federal Council has set a goal for UBS to strengthen its capital adequacy regulations, aiming to exceed international standards.
Professor Manuel Ammann from St. Gallen University has proposed two measures to enhance UBS's capital structure.
The first recommendation is to increase the leverage ratio to 10 percent, requiring UBS to hold more equity relative to its total assets.
The second measure suggests increasing surcharges based on the bank's global size and domestic market share.
UBS opposes tightening capital requirements and argues that it has bail-in bonds that could absorb losses in the event of liquidation. However, skepticism remains about the feasibility of this resolution strategy.
The recent handling of Credit Suisse's situation raises doubts about the effectiveness of resolution plans. The Federal Council's report highlights the risks associated with the resolution process, particularly concerning the bail-in mechanism and its impact on creditor and shareholder rights.
Critics argue that the Swiss definition of systemic importance is too narrow and fails to account for the significance of international private banking. The reliance on resolution plans appears tenuous, emphasizing the need for UBS to strengthen its capital framework.
The focus should be on creating a robust capital structure that can withstand domestic and international market pressures.