UBS Chair Colm Kelleher Voices Concerns Over Proposed Capital Requirement Increases

UBS Chair Colm Kelleher has expressed strong reservations regarding the Swiss government’s proposals to increase capital requirements for major banks, warning that such measures could undermine Switzerland’s status as a leading global financial center. In an interview with the Swiss newspaper SonntagsBlick, Kelleher acknowledged agreement with many of the 22 recommendations put forth in the government’s report following the Credit Suisse collapse, but he singled out the push for stricter capital requirements as a major concern.

Kelleher stated, “What I really have a big problem with is the increase in capital requirements. It just doesn’t make sense.” While specific capital requirements remain unspecified, estimates suggest that UBS could need to bolster its capital by $15 billion to $25 billion, according to Finance Minister Karin Keller-Sutter. Analysts at Autonomous Research have suggested a range of $10 billion to $15 billion in additional capital retention.

The UBS chair highlighted that excessive capital requirements could erode the bank’s competitiveness, leading to unfavorable pricing for banking products. He emphasized the need to prioritize liquidity management and the complete resolvability of banks rather than imposing stricter capital standards.

UBS plays a significant role in the Swiss financial landscape, with approximately $2.6 trillion in international assets under management, as noted in a 2021 Deloitte study. However, rising competition from financial hubs such as Luxembourg and Singapore poses a challenge to Switzerland’s dominance in the sector.

Experts have raised alarms about the potential risks to the Swiss economy if UBS were to fail, given its balance sheet is double that of Switzerland’s annual economic output. Despite these concerns, Kelleher reassured that UBS holds “significantly more” capital than its peers and operates with a low-risk business model primarily focused on wealth management and the Swiss domestic market.

Affirming UBS’s commitment to Switzerland, Kelleher stated that the bank would not exit its home country, even if faced with increased capital demands. He warned, however, that significant capital hikes would signal a shift in Switzerland’s aspirations as a relevant international financial center. “If politics forces us to massively increase our capital, then Switzerland has decided that it no longer wants to be a relevant international financial center,” Kelleher noted.

As discussions continue, Kelleher has expressed his willingness to engage with the government on these critical issues, emphasizing the importance of maintaining Switzerland’s financial integrity.