Sergio Ermotti, CEO of Swiss banking giant UBS, during the group’s annual shareholders meeting in Zurich on May 2, 2013.
Fabrice Coffrini | Afp | Getty Images
Switzerland’s tough new banking regulations create a “lose-lose situation” for UBS and may limit its potential to challenge Wall Street giants, according to Beat Wittmann, partner at Zurich-based Porta Advisors.
In a 209-page plan published Wednesday, the Swiss government proposed 22 measures aimed at tightening its policing of banks deemed “too big to fail,” a year after authorities were forced to broker the emergency rescue of Credit Suisse by UBS.
The government-backed takeover was the biggest merger of two systemically important banks since the Global Financial Crisis.
At $1.7 trillion, the UBS balance sheet is now double the country’s annual GDP, prompting enhanced scrutiny of the protections surrounding the Swiss banking sector and the broader economy in the wake of the Credit Suisse collapse.
Speaking to CNBC’s “Squawk Box Europe” on Thursday, Wittmann said that the fall of Credit Suisse was “an entirely self-inflicted and predictable failure of government policy, central bank, regulator, and above all [of the] finance minister.”
“Then of course Credit Suisse had a failed, unsustainable business model and an incompetent leadership, and it was all indicated by an ever-falling share price and by the credit spreads throughout [20]22, [which was] completely ignored because there is no institutionalized know-how at the policymaker levels, really, to watch capital markets, which is essential in the case of the banking sector,” he added.
The Wednesday report floated giving additional powers to the Swiss Financial Market Supervisory Authority, applying capital surcharges and fortifying the financial position of subsidiaries — but stopped short of recommending a “blanket increase” in capital requirements.
Wittman suggested the report does nothing to assuage concerns about the ability of politicians and regulators…
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