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UBS Chairman calls for enhanced regulatory powers



UBS Group AG Chairman Colm Kelleher recently voiced concerns about the negative impacts of imposing higher capital requirements on UBS. He argued that such measures would unfairly penalize shareholders and clients by increasing the cost of banking services. Kelleher highlighted that UBS already maintains capital buffers well above the minimum regulatory requirements, suggesting that additional capital requirements are unnecessary and counterproductive as we read in Bloomberg.


In a recent interview marking one year since UBS’s acquisition of Credit Suisse, Kelleher emphasized the need for stronger regulatory powers for Switzerland’s financial supervisor, Finma.



He suggested that Finma should be equipped with new tools, including the ability to impose fines and remove senior managers for lack of competence or suitability. Kelleher believes that these measures would better align bankers’ incentives with long-term stability and success.


The Swiss government is currently preparing a report on potential improvements to the nation's financial regulations following the collapse of Credit Suisse. Finance Minister Karin Keller-Sutter has shown support for expanding Finma's powers, specifically the ability to fine banks.


This support aligns with Kelleher's recommendations and underscores a growing consensus on the need for more robust regulatory mechanisms in the Swiss banking sector.


Kelleher expressed skepticism about the effectiveness of increasing capital requirements as a response to the financial crisis. He argued that excessive capital holdings could lead to higher costs for shareholders and clients, as banks would pass on these costs through more expensive services.



He stressed that UBS's existing capital levels are already well above regulatory standards, implying that further increases would be redundant and potentially harmful.


To ensure future financial stability, Kelleher believes that the Swiss government should clearly define the relationship between Finma and the central bank. He praised the American model for its clear division of responsibilities, where the central bank focuses on financial stability and banking regulation is seen as a separate, but integral, component of a stable financial system.


During the interview, Kelleher discussed the ongoing integration of UBS with Credit Suisse, a complex process overseen by CEO Sergio Ermotti. He indicated that this process, expected to take a minimum of five years, is crucial for establishing a strong leadership team for the future. To facilitate this, the Executive Board has been expanded, increasing the pool of potential successors and enhancing diversity within the leadership.



Kelleher plans to remain as chairman to supervise the significant CEO transition period. He highlighted the importance of this phase, where the integration of Credit Suisse into UBS is set to face its most challenging tasks, including the consolidation of operations, legal entity mergers, and IT system integration.


While acknowledging the challenges of the integration process and the current undervaluation of UBS shares, Kelleher expressed confidence in the future performance of UBS stock. He compared UBS’s valuation with Morgan Stanley, suggesting that UBS should be valued similarly, if not higher, given its global asset management capabilities. Kelleher hinted that the current market undervalues UBS shares, implying that they could be a lucrative investment in the near future, particularly by 2025.


17.03.2024



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