Latest news with #capitalrules
Reuters
3 days 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."
The Guardian
15-05-2025
- Business
- The Guardian
US reportedly plans to slash bank rules imposed to prevent 2008-style crash
US watchdogs are reportedly planning to slash capital rules for banks designed to prevent another 2008-style crash, as Donald Trump's deregulation drive opens the door to the biggest rollback of post-crisis protections in more than a decade. The move follows heavy lobbying by the banking industry, with lenders such as JP Morgan and Goldman Sachs having long complained that competition and lending have been hampered by burdensome rules governing the assets they must hold versus their liabilities. Regulators are expected to put forward the proposals this summer, aimed at cutting the supplementary leverage ratio that requires big banks to hold high-quality capital against risky assets including loans and derivatives, according to the Financial Times, which cited unnamed sources. The rules came into force after the 2008 financial crisis, as part of efforts to shock-proof the banking system and avoid damaging ripple effects that could cause another global economic meltdown. The crisis forced governments to spend billions of dollars bailing out big lenders that took too much risk. Changes to bank capital rules have been widely expected, with Trump having promised a bonfire of regulation during his second term in office, with plans to slash 10 regulations for every new one added. While some critics warn it is the wrong time to slash protections, given growing uncertainty over policy overhauls and market volatility, banks seem to have won the ear of policymakers. Lobbyists have long argued that the rules punish them for holding relatively low-risk assets including US debt, known as treasuries, and hampers their ability to provide more loans. Prospects of a deregulation drive have sparked concerns in some corners of the City of London that the UK could fall behind and become uncompetitive compared with US peers, due to stricter regulation. The chancellor, Rachel Reeves, in November said regulations put in place after the global financial crisis had 'gone too far', and ordered financial watchdogs to encourage more risk-taking and roll back rules that may have been curbing growth and competitiveness of City firms. Months later, the Bank of England announced it was further delaying new capital rules in the UK – known as Basel 3.1 – as it weighed the impact of Trump's return to the White House. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion The Financial Conduct Authority is looking at how it could ease mortgage rules that were tightened since the financial crisis, in order to boost home ownership amid pressure from the Labour government.
Bloomberg
07-05-2025
- Business
- Bloomberg
ECB Staff Backs Controversial ‘Opt In' for Bank Trading Rules
The European Central Bank has lent its support to a controversial proposal that would allow banks to choose whether to implement new trading capital rules next year or wait until 2027. In its contribution to a consultation by the European Commission, the ECB said a twin track proposal 'could help keep the momentum' on the implementation of the regulation, known as the Fundamental Review of the Trading Book.
