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UBS chairman ‘seriously concerned’ by tougher capital rules

BASEL (AFP) – The chairman of Swiss banking giant UBS voiced concern yesterday at proposed additional capital requirements aimed at ensuring banks have sufficient funds to withstand possible crises, insisting it was “the wrong remedy”.

In the aftermath of last year’s shock-rescue of Credit Suisse, Switzerland’s government said this month it aims to tighten regulations, including boosting the requirements for the amount of liquid capital banks must keep on hand.

“Naturally, our acquisition of Credit Suisse has given rise to a renewed debate within Switzerland about how banks should be regulated in order to guard against similar situations in the future,” Colm Kelleher told shareholders gathered for UBS’ general assembly in Basel.

But while he said the bank endorsed many of the recommendations recently made by the Swiss government towards reforming banking regulations, “we are seriously concerned about some of the discussions related to additional capital requirements”.

“There can be no regulatory solution for a broken business model,” he said, insisting that “it was not too low capital requirements that forced Credit Suisse into the historic weekend rescue”.

“Trust cannot be regulated”.

Kelleher highlighted that both UBS and Credit Suisse had been operating under the same regulatory framework. “Our ability to acquire Credit Suisse underscores that the regulatory framework was not the problem,” he said.

And he warned that boosting requirements in Switzerland could put banks there at a competitive disadvantage globally. “It is imperative that our regulatory policies ensure a level playing field,” he said, insisting that “Switzerland’s regulation must remain broadly aligned with global standards”.

UBS, Switzerland’s largest bank, was strong-armed by Swiss authorities in March last year into a USD3.25-billion takeover of Credit Suisse, to keep its closest domestic rival from going under.

The acquisition created a banking behemoth with a balance sheet twice the size of Switzerland’s annual economic output, causing significant jitters.

Earlier this month, the Swiss government said it aimed to tighten regulations surrounding big banks in a bid to “reduce the risks to the economy, the state and the taxpayer”.