UBS Chairman Decries Tighter Capital Rules

The UBS chairman voiced concern during the Swiss banking giant's general assembly Wednesday at proposed additional capital requirements, but shareholders said they were more worried about "excessive" executive pay

Basel, (APP - UrduPoint / Pakistan Point News - 24th Apr, 2024) The UBS chairman voiced concern during the Swiss banking giant's general assembly Wednesday at proposed additional capital requirements, but shareholders said they were more worried about "excessive" executive pay.

In the aftermath of last year's shock-rescue of Credit Suisse, Switzerland's government said this month it aims to tighten regulations, including boosting the requirements for the amount of liquid capital banks must keep on hand.

"Naturally, our acquisition of Credit Suisse has given rise to a renewed debate within Switzerland about how banks should be regulated in order to guard against similar situations in the future," Colm Kelleher told shareholders gathered for UBS's general assembly in Basel.

But while he said the bank endorsed many of the recommendations recently made by the Swiss government towards reforming banking regulations, "we are seriously concerned about some of the discussions related to additional capital requirements". That, he insisted, was "the wrong remedy".

"There can be no regulatory solution for a broken business model," he said, insisting that "it was not too low capital requirements that forced Credit Suisse into the historic weekend rescue". "Trust cannot be regulated."

UBS, Switzerland's largest bank, was strong-armed by Swiss authorities in March last year into a $3.25-billion takeover of Credit Suisse to keep its closest domestic rival from going under.

Even before joining forces, both banks figured among the 30 banks worldwide considered "too-big-to-fail".

The acquisition created a banking behemoth with a balance sheet twice the size of Switzerland's annual economic output, causing significant jitters.

Earlier this month, the Swiss government said it aimed to tighten regulations surrounding big banks in a bid to "reduce the risks to the economy, the state and the taxpayer".

Among other things, the government called for tightening capital requirements for important banks, in a bid to strengthen their capital base and improve resolvability.

Kelleher warned that boosting requirements in Switzerland could put banks there at a competitive disadvantage globally, stressing the need for "a level playing field".

But shareholders who took the floor voiced most concern about salaries and bonuses dished out to the bosses at the mega-bank.

Vincent Kaufmann, director of the Ethos foundation, which represents pension funds in Switzerland, told the gathering he was "seriously worried" about salary levels.

Amid the crisis, UBS brought back Sergio Ermotti, who led the bank between 2011 and 2020, to take the helm as chief executive and oversee the complex absorption of Credit Suisse.

After taking the reins a year ago, he received 14.4 million Swiss francs ($15.7 million) in compensation for the remaining months of 2023. "That is excessive," said Fritz Peter of the Swiss shareholder group Actares, adding that "measure and humility should have been on the agenda".

Granting such a large amount was a "misguided decisions", which "painfully recalls the excesses of the Credit Suisse past", he said.

Kelleher, however, justified the payment, pointing to Ermotti's "essential" contribution, insisting the compensation reflected his performance.

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