Executives from UBS, the largest bank in Switzerland, voiced concerns Wednesday about the Swiss government’s recently proposed plan to impose tougher capital requirements on the institution. This plan, announced two weeks ago, aims to regulate banks deemed “too big to fail” and prevent a recurrence of the Credit Suisse collapse, which shook global financial markets last year.
UBS Chairman Colm Kelleher expressed “serious concerns” about the proposed capital requirements, stating that “additional capital is the wrong remedy.” The bank estimates that it may need to raise $15 billion to $25 billion in additional capital to comply with the new requirements.
UBS acquired its rival Credit Suisse last year following the latter’s meltdown, which raised concerns about the potential impact of UBS’s failure on the Swiss economy. The government’s plan is intended to strengthen the banking system and prevent a possible UBS collapse, though the timeline for implementing these changes remains uncertain due to the lengthy legislative process.
Despite the prospect of stricter capital rules, Kelleher emphasized UBS’s commitment to distributing excess capital to shareholders through dividends and share repurchases. He stated that UBS is “not too big to fail” and is one of the best-capitalized banks in Europe. The bank aims to return more capital to shareholders than it did before the Credit Suisse acquisition by 2026.
UBS CEO Sergio Ermotti announced at the meeting that the merger of the Swiss operations of the two banks is expected to be completed before the end of the third quarter. However, he acknowledged that difficult decisions lie ahead during the integration of Credit Suisse. “Despite our efforts to mitigate the impact, we will need to part ways with some colleagues in the short to medium term,” Ermotti said, confirming a media report from the weekend indicating that the bank is planning five rounds of layoffs in the coming months.
Ermotti’s compensation package for the first nine months of 2023, amounting to 14.4 million Swiss francs ($15.75 million), sparked criticism from several shareholders during the meeting. However, Kelleher defended the CEO’s pay, stating that Ermotti “arguably has the toughest job in the financial services industry globally” and has achieved positive results.
