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UBS faces backlash after CEO Ermotti misrepresented a study showing the bank saves $2.9 billion annually due to state guarantees, claiming the figures were outdated. Despite clarifications, the actual model used in the study is from 2002, not 1974, raising concerns about transparency and accountability. Meanwhile, UBS continues to benefit significantly, allowing its executives to indulge in luxury shopping.
Markus Ronner from UBS addresses the Federal Council's proposals to increase capital requirements for banks following UBS's takeover of Credit Suisse. As the consultation process is set to begin in May, concerns arise about potential impacts on loan interest rates and the possibility of UBS relocating abroad. The discussion is part of a broader examination of financial policies, including insights from monetary economist Fabio Canetg on central banks, inflation, and economic strategies in Switzerland.
The debate over capital requirements for systemically important banks, particularly UBS, intensifies following the Credit Suisse merger. UBS currently holds $74 billion in CET1 capital, exceeding the regulatory minimum, but faces increased requirements due to the merger and Basel III rules, which could disadvantage it compared to international competitors. UBS argues that stricter capital demands could harm the economy, emphasizing that the collapse of Credit Suisse was due to mismanagement rather than insufficient capital.
UBS shares have experienced a significant decline of over 6% this week, despite the bank reporting strong fourth-quarter profits of $770 million and a full-year profit of $5.09 billion. Investor concerns about future capital requirements, particularly following the Credit Suisse takeover, have overshadowed positive earnings, leading to a 9% drop on the results day. Analysts remain optimistic, with over half recommending a buy, and Goldman Sachs setting a target price of 44.50 francs, suggesting a potential 47% increase in the medium term.
UBS's Chief Compliance and Governance Officer, Markus Ronner, warned that imposing an additional 25 billion Swiss francs in capital requirements would severely weaken the bank and force a reevaluation of its strategy. He emphasized that UBS is already one of the best-capitalized banks globally and that such extreme demands would significantly increase costs and undermine competitiveness. Ronner cautioned that excessive capital could create a false sense of security, potentially leading to missed opportunities for timely interventions.
UBS has expressed concerns over potential stricter capital requirements in Switzerland, warning that such measures could undermine its competitiveness and threaten its business model. Compliance chief Markus Ronner highlighted that the bank already holds significant capital due to the Credit Suisse acquisition and faces additional costs that could impact profitability. The Swiss government plans to introduce new regulations to mitigate the risk of future banking crises, pending parliamentary approval.
UBS has warned that stricter capital requirements in Switzerland could undermine its competitiveness and threaten its business model. Head of Compliance Markus Ronner highlighted that the bank, already burdened with additional capital from the Credit Suisse takeover, would face significant costs, potentially reducing expected profits and attractiveness to investors. The Swiss government plans to introduce new regulations to mitigate the risk of future banking crises, pending parliamentary approval.
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.
Markus Ronner
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