Swiss Finance Minister Karin Keller-Sutter and UK counterpart Rachel Reeves discussed the implications of Donald Trump's election victory on banking regulation, emphasizing the need for a balance between competitiveness and stability. Following Trump's win, bank shares surged, while Keller-Sutter proposed stricter capital requirements for major banks, including a potential $25 billion increase for UBS, which is resisting the move due to high associated costs.
At a recent Swiss Finance Institute event, experts debated the need for increased capital requirements for banks, particularly UBS, in light of the Credit Suisse crisis. While some argue that higher equity could enhance stability, others warn it may hinder lending and competitiveness. The upcoming PUK report is anticipated to shed more light on these critical issues.
The debate over capital requirements for banks, particularly UBS, intensifies following the Credit Suisse crisis, with experts divided on whether higher equity ratios would enhance stability or harm economic competitiveness. While some argue for increased capital to ensure resilience, others warn it could restrict lending and diminish international standing. The upcoming PUK report is anticipated to shed more light on these critical issues.
UBS's Markus Ronner warned that increasing equity by CHF 25 billion could incur annual costs of CHF 2.5 to 3.75 billion, leading to significant structural disadvantages and pressure from shareholders regarding capital productivity. He emphasized the importance of maintaining an attractive business model and noted that UBS is already well capitalized with a core capital ratio of 14 percent.
UBS is under pressure to bolster its equity capital, with discussions around increasing it by 15 to 25 billion francs. While UBS argues against excessive capital requirements, it lags behind several European competitors in capital ratios, prompting calls from regulators for a stronger balance sheet. The Swiss Finance Institute is hosting an event to debate the future of banking capital requirements, highlighting the need for UBS to reassess its capital strategy.
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