Finance minister wants Swiss banks to hold more equity
Finance Minister Karin Keller-Sutter has repeated calls for banks and their holdings in subsidiaries abroad to hold more equity.
She argued that more equity capital would make it easier to wind up a bank in an emergency.
The aim of the state is to limit risk. UBS’s balance sheet, for example, is double Switzerland’s GDP, Keller-Sutter said on Monday on Swiss public television SRF.
Additional capital would cost UBS an estimated CHF15-25 billion ($16-27 billion), according to SRF. Keller-Sutter did not confirm the figure but described it as plausible.
UBS is well positioned and managed, the finance minister said. She added: “But we must prepare ourselves for what could happen in ten- or 20-years’ time and have the necessary instruments to intervene in the event of a crisis and limit the damage to our country.”
Implicit state guarantee
Keller-Sutter said that if it is assumed that emergency liquidity would be provided in the event of a crisis, for example if the state were to intervene, then it must be said that this is an implicit (i.e. unspoken or tacit) state guarantee. If a bank were to be restructured or even liquidated, there would “naturally be risks for the state or for taxpayers”.
Colm Kelleher, chair of UBS’s board of directors, recently played down the importance of equity capital. UBS supports many of the recommendations of regulators and expert committees, including those in the government’s latest report on banking stability, Kelleher said at the bank’s annual general meeting (AGM) last Wednesday. However, he said that additional capital was “the wrong remedy”.
UBS CEO denies state guarantee
UBS CEO Sergio Ermotti had already rejected the argument that UBS had an implicit state guarantee, saying this was “factually incorrect”. He referred to the total loss-absorbing capital (TLAC) of around $200 billion (CHF182.5 billion) held by UBS.
“UBS’s risks are borne by the shareholders and the holders of AT1 instruments and loss-absorbing TLAC bonds – not by the taxpayer,” said Ermotti. His CHF14.4 million remuneration for nine months’ work triggered criticism at the recent AGM, particularly among minor shareholders.
Adapted from German by DeepL/kp
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