New Banking Regulations Stir Market: UBS Wobble

Wed, Apr 10th 2024

Regulatory ripples hit UBS: Political divides and market uncertainties loom.

Following the Federal Council’s report on “too big to fail” regulations, UBS shares fell by nearly 4% later recovering, closing down 2.7%. This report, addressing banking stability, sparked market uncertainty, especially regarding its implications for UBS, amidst rising US inflation.

Despite the day’s drop, UBS shares have seen a nearly 50% increase over the past year. The report’s complexity, nearly 400 pages, has left markets and analysts seeking clarity on its impact on UBS, now Switzerland’s sole major bank post-Credit Suisse.

The report proposes 22 measures, focusing on enhancing liquidity, managerial accountability, and crisis resolution for systemically important banks, including UBS, Postfinance, Raiffeisen, and ZKB.

Notably, it doesn’t broadly raise capital requirements or impose bonus bans but suggests more targeted adjustments.

The Federal Council aims to improve banking regulation, acknowledging gaps in the existing system. The proposals include extended powers for FINMA, potential expanded liquidity provision by the Swiss National Bank, and clearer crisis management frameworks.

The emphasis is on not increasing capital requirements indiscriminately but focusing on risk-oriented measures.

Political responses reflect concerns about the regulations’ sufficiency and clarity. The SP criticises the lack of decisive action on equity and bonuses, with a spokesperson stating, “By dispensing with these requirements, the Federal Council is playing into the hands of the new mega-bank.”

The FDP and Green Liberals urge caution to maintain international competitiveness. Vontobel’s Andreas Venditti noted the market’s need for clarity due to the report’s complexity.

©Keystone/SDA

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