Latest news with #CreditSuisse
Yahoo
18 hours ago
- Business
- Yahoo
Switzerland poised to pitch tough new capital rules for UBS
By Ariane Luthi and Oliver Hirt ZURICH (Reuters) -The Swiss government is this week widely expected to propose tough new capital rules for UBS following the 2023 collapse of its rival Credit Suisse, ushering in a long battle in parliament over the closely watched regulations. UBS acquired Credit Suisse at a knock-down price in March 2023, and shock over the demise of Switzerland's second-biggest bank after a string of scandals sparked a chorus of calls to toughen regulations so there could be no repeat meltdown. Central to these so-called "too big to fail" plans sketched out by the government last year is the degree to which UBS should capitalise its foreign subsidiaries to mitigate risk. That question should be answered on Friday when the government presents its proposals. Analysts, lawmakers and the bank itself expect the rules will demand UBS fully capitalise the units - despite the bank's opposition. "The market would be surprised if the federal cabinet did not demand 100% capitalisation of foreign units," said Vontobel analyst Andreas Venditti, pointing to comments by regulators and how UBS shares are undervalued vis-a-vis competitors. According to the bank's own calculations, full capitalisation of the foreign subsidiaries would require UBS finding upwards of $20 billion in additional capital. UBS argues that such a burden would put the Zurich-based lender at a disadvantage against rivals and undermine Switzerland's competitiveness as a global financial centre. "The winners will be our competitors outside Switzerland," UBS CEO Sergio Ermotti told an event near Lucerne last month. "Those guys are just waiting for the nonsense to happen." But the Swiss National Bank and financial market regulator FINMA, both of which drew fire for their response to the Credit Suisse meltdown, have backed full capitalisation of the units. UBS has floated concessions to avert such an outcome and has examined a host of scenarios, including moving its headquarters abroad. However, executives say it is not planning that. Many of the lawmakers, UBS sources and analysts Reuters spoke to for this story believe the regulations will likely be diluted during the legislative process. Final legislation for the new rules is expected in 2027 at the earliest. REALIGNMENT The new Swiss regulations could trigger a realignment of UBS's business model, which is currently geared around growth in the United States and Asia, investors say. "UBS will have to switch into a cost optimisation, risk-weighted assets optimisation mode rather than a growth mode," said Antonio Roman, portfolio manager at Axiom Alternative Investments. If UBS had to fully capitalise its foreign units it would have a required CET1 ratio of 17 to 19%, according to the bank's own calculations. That compares with 2024 requirements on competitors Deutsche Bank of 11.2% and Morgan Stanley of 13.5%. A parliamentary inquiry noted that since the Credit Suisse takeover, UBS has had a balance sheet bigger than the Swiss economy and urged the government to give suitable consideration to the foreign units of globally relevant banks. "The issue in Switzerland is far more important given the nature of UBS and the size of the U.S. subsidiary relative to the parent bank," Neil Esho, Secretary General of the Basel Committee on Banking Supervision, recently told Reuters. Once new rules are set, the bank will likely have a phase-in period to adjust, and full compliance should not be required until the 2030s, banking experts say. "The adjustment can't be done all at once," said Hans Gersbach, a banking and economics professor at ETH Zurich university. "Otherwise it's more destabilising than stabilising." Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
19 hours ago
- Business
- Reuters
Switzerland poised to pitch tough new capital rules for UBS
ZURICH, June 3 (Reuters) - The Swiss government is this week widely expected to propose tough new capital rules for UBS (UBSG.S), opens new tab following the 2023 collapse of its rival Credit Suisse, ushering in a long battle in parliament over the closely watched regulations. UBS acquired Credit Suisse at a knock-down price in March 2023, and shock over the demise of Switzerland's second-biggest bank after a string of scandals sparked a chorus of calls to toughen regulations so there could be no repeat meltdown. Central to these so-called "too big to fail" plans sketched out by the government last year is the degree to which UBS should capitalise its foreign subsidiaries to mitigate risk. That question should be answered on Friday when the government presents its proposals. Analysts, lawmakers and the bank itself expect the rules will demand UBS fully capitalise the units - despite the bank's opposition. "The market would be surprised if the federal cabinet did not demand 100% capitalisation of foreign units," said Vontobel analyst Andreas Venditti, pointing to comments by regulators and how UBS shares are undervalued vis-a-vis competitors. According to the bank's own calculations, full capitalisation of the foreign subsidiaries would require UBS finding upwards of $20 billion in additional capital. UBS argues that such a burden would put the Zurich-based lender at a disadvantage against rivals and undermine Switzerland's competitiveness as a global financial centre. "The winners will be our competitors outside Switzerland," UBS CEO Sergio Ermotti told an event near Lucerne last month. "Those guys are just waiting for the nonsense to happen." But the Swiss National Bank and financial market regulator FINMA, both of which drew fire for their response to the Credit Suisse meltdown, have backed full capitalisation of the units. UBS has floated concessions to avert such an outcome and has examined a host of scenarios, including moving its headquarters abroad. However, executives say it is not planning that. Many of the lawmakers, UBS sources and analysts Reuters spoke to for this story believe the regulations will likely be diluted during the legislative process. Final legislation for the new rules is expected in 2027 at the earliest. The new Swiss regulations could trigger a realignment of UBS's business model, which is currently geared around growth in the United States and Asia, investors say. "UBS will have to switch into a cost optimisation, risk-weighted assets optimisation mode rather than a growth mode," said Antonio Roman, portfolio manager at Axiom Alternative Investments. If UBS had to fully capitalise its foreign units it would have a required CET1 ratio of 17 to 19%, according to the bank's own calculations. That compares with 2024 requirements on competitors Deutsche Bank of 11.2% and Morgan Stanley of 13.5%. A parliamentary inquiry noted that since the Credit Suisse takeover, UBS has had a balance sheet bigger than the Swiss economy and urged the government to give suitable consideration to the foreign units of globally relevant banks. "The issue in Switzerland is far more important given the nature of UBS and the size of the U.S. subsidiary relative to the parent bank," Neil Esho, Secretary General of the Basel Committee on Banking Supervision, recently told Reuters. Once new rules are set, the bank will likely have a phase-in period to adjust, and full compliance should not be required until the 2030s, banking experts say. "The adjustment can't be done all at once," said Hans Gersbach, a banking and economics professor at ETH Zurich university. "Otherwise it's more destabilising than stabilising."
Reuters
2 days ago
- Business
- Reuters
Law firm challenges Swiss court over delay in Credit Suisse AT1 write-down case, filing shows
LONDON, June 2 (Reuters) - A Zurich-based law firm has filed a complaint with the Swiss Federal Supreme Court challenging a tribunal's delay in addressing investors' claim on the write-down of Credit Suisse bonds, a legal filing seen by Reuters shows. Hundreds of bondholders in April 2023 sued market regulator FINMA at the Swiss administrative court in St. Gallen to recoup losses on 16 billion Swiss francs ($19.4 billion) of AT1 bonds that were written down when UBS (UBSG.S), opens new tab rescued Credit Suisse. There has been no significant activity by the Federal Administrative Court since spring 2024, the filing, submitted in German, shows. A spokesperson for the Federal Supreme Court confirmed that the court had received the complaint. The complaint was filed by Zurich-based law firm grosz I poledna, acting for Pallas, the law firm representing the investors, around mid-May, according to a person familiar with the proceedings. Pallas represents about 800 clients who at the time of the write-down held around $2 billion of Credit Suisse AT1 bonds, a representative for the law firm told Reuters. Pallas declined to comment for the story. A representative for Switzerland's Federal Administrative court in St. Gallen said: "The proceedings are particularly challenging due to their scope, the high number of parties and the complexity of the legal issues involved, and entail many procedural steps. This is a multi-party procedure, whereby it must also be ensured that all complainants or their legal representatives are granted the right to be heard. We treat the proceedings as a priority." A spokesperson for FINMA declined to comment. While questions of an administrative nature were clarified between the second half of 2023 and spring 2024, according to the filing, there have been no "discernible activities" by the Federal Administrative Court, the filing shows. "While this case is unprecedented for the Swiss courts as there have never been so many appellants challenging one FINMA order, by now it should have progressed as appellants have a right to have their case looked at expeditiously," said Jonas Hertner, a Zurich-based lawyer who had previously represented Credit Suisse AT1 clients at law firm Quinn Emanuel. The Swiss Federal Supreme Court is the head of the Swiss judiciary system and appellants can file complaints to pressure the administrative court to act. There is no deadline by which the Supreme Court is required to respond, but complaints of this kind could take a few months, according to lawyers. In October 2023, Reuters reported that the St. Gallen administrative tribunal was weighing whether to grant Credit Suisse investors access to more documents. Back then, some investors had hoped to gain access to filings in a matter of weeks. The documents, including the responses to the appeal by Credit Suisse and FINMA, have not yet been made public, according to the complaint. The write-down shocked markets and upended a long-established practice of granting bondholders' priority over shareholders in a debt recovery. The market has since recovered with UBS tapping the AT1 market after the Credit Suisse rescue. ($1 = 0.8241 Swiss francs)
Bloomberg
5 days ago
- Business
- Bloomberg
UBS Loses Two More Senior Bankers in Asia Amid Ongoing Revamp
Two Hong Kong-based senior bankers have resigned from UBS Group AG, according to a company spokesperson, amid the bank's ongoing revamp of its financing business following the takeover of Credit Suisse. Kelly Jin, head of leveraged capital markets and structured solutions group for Asia, and James Li, executive director at the bank's global lending unit, left this week, the spokesperson confirmed when asked.
Economic Times
6 days ago
- Business
- Economic Times
HDFC Bank faces regulatory scrutiny over alleged mis-selling of Credit Suisse bonds in UAE
Mumbai: HDFC, India's most valuable bank, continues to be in a bit of a pickle in the Middle East ever since it ran into a controversy two years ago over alleged mis-selling of high-risk bonds floated by the disgraced Swiss lender Credit Suisse (CS). In the wake of the glare that HDFC faced amid complaints from bond investors, at least one UAE regulator is now examining the episode to determine if the bank had breached any of the licensing conditions while marketing the soured third-party products. ADVERTISEMENT A key issue is how the bank conducted business with customers through legal entities based in different jurisdictions. A customer might have been served by relationship managers (RMs) of its UAE office, while receiving advisory from officials attached to its operations in a separate entity at the Dubai International Financial Centre (DIFC), even as the accounts got booked with HDFC's full-service branch in Bahrain. Investors opened accounts with the Bahrain office and funded the account to buy the bonds, which is a common enough practice. DIFC, a financial free zone, functions as a separate jurisdiction under an independent legal system, different from general UAE laws. Financial services conducted in and from DIFC are regulated by Dubai Financial Services Authority (DFSA), an independent regulator. "If officials advising clients belong to the bank's DIFC office, and the RMs are employees of the Dubai representative office, which is under the UAE Central Bank, but the clients are not onboarded by the DIFC office, it can raise eyebrows among regulators. So when some aggrieved investors of the Credit Suisse bonds approached DFSA, alleging that they were misled, it was found that they were not onboarded in the DIFC branch of HDFC. The practice came to light as the regulators looked into the matter following investor complaints," a person with knowledge of the situation HDFC Bank spokesperson did not respond to know-your-customer rules, anti-money laundering regulations, and the risk assessment under the suitability rules all differ in DIFC. "Besides, DIFC banks focus on 'professional clients' who are typically categorised as those having a minimum liquid net worth of $1 million. We don't know whether some clients who did not meet the criteria were onboarded by the Dubai rep office but was advised by the DIFC outfit," said another person. In most banks, advisors come to the picture for high-valued clients as RMs often lack the skill. ADVERTISEMENT The lender had extended leverage to some of the clients-offering loans to well-heeled non-resident Indians (NRIs) to invest in financial products. HNIs who had borrowed to invest were left fuming after a troubled Credit Suisse chose to write-down the AT1 bonds in 2023. "Even as their investments were wiped out, they faced margin calls from the lender as the bond prices dropped as CS' troubles intensified in the run-up to the write-down decision," said a finance professional in the region who had watched the episode regular bonds, AT1, or additional tier-one bonds, carry a higher risk and are issued by banks to shore up capital. "Both the UAE authorities as well as DFSA had sought explanation from the bank then and the examination in the matter is ongoing," said a third person familiar with the situation. ADVERTISEMENT About 20 employees have quit HDFC UAE in recent months with the bank restricting bonuses and incentives, and going slow on the wealth management business in the UAE. This is understood to include a long-serving official. A number of them have joined a wealth advisory firm with roots in India. (You can now subscribe to our ETMarkets WhatsApp channel)
