UBS has received a warning from the Switzerland government that it might need to come up with up to $27 billion in order to cover any losses and spare the public from having to fund the rescue of a big bank.
Colm Kelleher, chairman of UBS, voiced concerns on the planned rules, stating that they might compel the bank to keep more cash and other liquid assets.
Referencing Credit Suisse, he contended that more money is the wrong cure and that a failing business model cannot be fixed by regulation.
UBS shares closed nearly 3% lower in Zurich as a result of the Swiss government’s recommendations, which have caused the company to fall 10% since the government released the recommendations as part of a report on the stability of the banking sector.
Such figures, according to Swiss Finance Minister Karin Keller-Keller Sutter, were “plausible.” More specific ideas will be released by the Swiss government in the first quarter of the following year.
It was written by RBC Capital Markets banking analyst Anke Reingen that UBS shareholders’ fears were “justified.”
Because a bank can only retain a larger amount of cash in reserve before returning it to shareholders or using it to increase earnings, investors are concerned.
UBS’s shares have increased by about 40% in the last year, contributing to its impressive market valuation. But because of the execution risk in the Credit Suisse merger, this makes the stock more susceptible to drops.
Kelleher emphasized the benefits of the agreement, pointing out that it “cements” UBS’s position as the “pre-eminent global wealth manager” and contributed client assets equal to seven to ten years of organic growth.
Additionally, he supported UBS CEO Sergio Ermotti’s 2023 compensation plan, which was heavily criticized by shareholders.
Switzerland is home to international financial services, including Fintech and Blockchain companies.
