Finma Plans Stress Tests at UBS After Scrutiny on Lender Rises
(Bloomberg) — Switzerland’s financial regulator Finma said it would carry out two stress tests at UBS Group AG this year, as the authority boosts oversight of the lender in the wake of its acquisition of Credit Suisse.
The regulator “continues to make consistent use of the full range of supervisory instruments at its disposal to fulfill its legal mandate to supervise the integrated large bank,” said Thomas Hirschi, head of the banks division at a press conference in Bern on Wednesday. He added that one stress test will take place in each half of 2024, and said that the institution is looking at whether it can change its existing policy and publish the results.
Switzerland is overhauling its financial regulation following the near-collapse and takeover of Credit Suisse last year. The government is set to deliver a report on the matter next month which may result in stricter capital and liquidity requirements for UBS, given that its balance sheet is now more than twice the size of the domestic economy.
The combined bank’s recovery and emergency planning will be critically reviewed, according to a press release of Finma. The central question is whether the corresponding measures are adequate and capable of being implemented in crisis situations and have been aligned to a range of crisis scenarios, the regulator said. Some 40 on-site supervisory reviews are planned this year, and the staffing of the teams dedicated to the bank has been expanded, it said.
Liquidity Rules
UBS already saw a “really significant” increase in its regulatory liquidity requirements, following a 2022 revision that came into effect at the beginning of this year, Finma President Marlene Amstad said. Lessons from the events during late 2022 and 2023, in which Credit Suisse clients withdrew tens of billions of dollars in funds, informed the application of the ordinance, Amstad said.
Banking division chief Hirschi added that according to the revision Finma sets an individual liquidity surcharge for each bank every year, on top of requirements applying to all lenders. The surcharge is determined by a bank’s individual business model and the specific risks it’s exposed to.
In the most recent procedure for UBS, “we could build upon lessons learnt from the Credit Suisse crisis.”
Earlier this week the Swiss National Bank, which also plays a role in bank supervision, said that regulators should re-examine the increase in capital requirements that’s already planned as a result of UBS’s larger size. Finma declined to comment further on that matter on Wednesday.
UBS Chairman Colm Kelleher has recently argued that further increases in capital requirements would penalize shareholders and customers.
(Updates with Hirschi comments from sixth paragraph)
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