Shaken by crises, Switzerland fetters UBS's global dream
Switzerland announced reforms on Friday to make its biggest bank UBS safer and avoid another crisis, hampering the global ambitions of a lender whose financial weight eclipses the country's economy.
UBS emerged as Switzerland's sole global bank more than two years ago after the government hastily arranged its rescue of scandal-hit Credit Suisse to prevent a disorderly collapse.
The demise of Credit Suisse, one of the world's biggest banks, rattled global markets and blindsided officials and regulators, whose struggle to steer the lender as it lurched from one scandal to the next underscored their weakness.
On Friday, speaking from the same podium where she had announced the Credit Suisse rescue in 2023 as finance minister, Switzerland's president Karin Keller-Sutter delivered a firm message. The country would not be wrongfooted again.
"I don't believe that the competitiveness will be impaired, but it is true that growth abroad will become more expensive," Keller-Sutter said of UBS.
"We've had two crises. 2008 and 2023," she said. "If you see something that is broken, you have to fix it."
During the global financial crisis of 2008, UBS was hit by a losses in subprime debt, as a disastrous expansion into riskier investment banking forced it to write down tens of billions of dollars and ultimately turn to the state for help.
Memories of that crisis also linger, reinforcing the government's resolve after the collapse of Credit Suisse.
For UBS, which has a financial balance sheet of around $1.7 trillion, far bigger than the Swiss economy, the implications of the reforms proposed on Friday are clear. Switzerland no longer wants to back its international growth.
"Bottom line: who is carrying the risk for growth abroad?" said Keller-Sutter. "The bank, its owners or the state?"
The rules the government proposed demand that UBS in Switzerland holds more capital to cover risks in its foreign operations.
That move, one of the most important steps taken by the Swiss in a series of otherwise piecemeal measures, will make UBS's businesses abroad more expensive to run for one of the globe's largest banks for millionaires and billionaires.
Following publication of the reform plans, UBS Chairman Colm Kelleher and CEO Sergio Ermotti said in an internal memo that if fully implemented, they would undermine the bank's "global competitive footprint" and hurt the Swiss economy.
Strategy
The reform would require UBS to hold as much as $26 billion in extra capital.
Some believe the demands may alter the bank's course.
"It could be that UBS has to change its strategy of growth in the United States and Asia," said Andreas Venditti, an analyst at Vontobel.
"It's not just growing. It makes the existing business more expensive. It is an incentive to get smaller and this will most likely happen."
Credit Suisse's demise exploded the myth of invincibility of one of the wealthiest countries in the world, home to a global reserve currency, and proved as unworkable a central reform of the financial crisis to prevent state bailouts.
For many in Switzerland, the government's reforms are long overdue.
"The bank is bigger than the entire Swiss economy. It makes sense that it should not grow even bigger," said Andreas Missbach of Alliance Sud, a group that campaigns for transparency.
"It is good that the government did not give in to lobbying by UBS. The question is whether it is enough. We have a banking crisis roughly every 12 years. So I'm not really put at ease."
UBS CEO Ermotti had lobbied against the reforms, arguing that a heavy capital burden would put the bank on the back foot with rivals.
The world's second-largest wealth manager after Morgan Stanley is dwarfed by its U.S. peer. Morgan Stanley shares value the firm at twice its book value, compared with UBS's 20% premium to book.
On Friday, the bank reiterated this message, saying that it strongly disagreed with the "extreme" increase in capital.
But others are sceptical that the government has done enough.
Hans Gersbach, a professor at ETH Zurich, said there was still no proper plan to cope should UBS run into trouble.
"The credibility of the too big to fail regime remains in question."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Economic Times
21 hours ago
- Economic Times
$2.4 trillion worth of gold! India's household hoard is 6x Pakistan's economy
Indian households hold an estimated 25,000 tonnes of gold worth $2.4 trillion—nearly six times Pakistan's GDP and greater than Italy's economy. Despite monetisation challenges, high prices and strong demand keep gold central to Indian wealth. UBS projects stable demand and rising prices, boosting savings and gold-backed lending. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads India's gold obsession isn't just cultural—it's a display of household wealth on a global scale. Indian households, including temples, collectively hold around 25,000 tonnes of gold, valued at approximately $2.4 trillion at current market prices, according to the World Gold Council (WGC). That's nearly 56% of India's projected FY26 nominal put that in perspective, Pakistan's entire economy is worth around $411 billion, according to IMF estimates for FY25. This means India's private gold holdings are nearly six times larger than Pakistan's GDP. In fact, the value of gold held by Indian households is greater than the GDP of developed countries like Italy ($2.4 trillion) and Canada ($2.33 trillion).According to UBS, gold prices have doubled since FY20, significantly boosting Indian household wealth. The bank forecasts prices to rise further to $3,500 per ounce by 2026, driven by global uncertainties such as trade tensions, inflation, and geopolitical risks. While UBS expects gold volume demand in India to soften in FY26, high prices will keep net imports elevated at $55–60 billion, or about 1.2% of record prices, gold demand in India held up well in FY25, with consumer demand at 782 tonnes—15% above the pre-pandemic average. Jewellery demand softened slightly, but retail investment in gold bars and coins jumped 25% YoY, supported by a cut in customs duty from 15% to 6% in ahead, UBS projects gold demand to moderate to 725 tonnes in FY26, before recovering to 800 tonnes in FY27 as household consumption stabilises. A key factor behind this recovery could be a $55 billion pay boost expected from the 8th Central Pay Commission, which tends to increase physical savings—particularly in real estate and India's gold reserves are impressive, efforts to monetise this wealth have largely fallen short. UBS notes that less than 2% of household gold is used as collateral for loans, despite attempts by banks and NBFCs to expand in this segment. Bajaj Finance Shriram Finance , and Chola are among the financial firms increasing their exposure to gold-backed lending. However, structural barriers—such as emotional attachment to gold jewellery—have limited the success of initiatives like the Gold Monetization Scheme (GMS) and Sovereign Gold Bonds (SGBs). UBS also points out that SGBs were discontinued in February 2024, partly due to rising gold prices and growing liabilities for the said, India's current account deficit remains manageable, despite the heavy import burden of gold. UBS attributes this to buffers built post-pandemic, including a strong services trade surplus and robust remittance flows, which help offset gold-related 14% of the world's private gold stock, India continues to be the largest private holder of gold globally. As UBS puts it, Indian households are not just sentimentally attached to gold—they're growing wealthier because of it. And in a world of uncertainty, India's age-old trust in gold seems to be paying off.
Time of India
21 hours ago
- Time of India
$2.4 trillion worth of gold! India's household hoard is 6x Pakistan's economy
India's gold obsession isn't just cultural—it's a display of household wealth on a global scale. Indian households, including temples, collectively hold around 25,000 tonnes of gold, valued at approximately $2.4 trillion at current market prices, according to the World Gold Council (WGC). That's nearly 56% of India's projected FY26 nominal GDP. To put that in perspective, Pakistan's entire economy is worth around $411 billion, according to IMF estimates for FY25. This means India's private gold holdings are nearly six times larger than Pakistan's GDP. In fact, the value of gold held by Indian households is greater than the GDP of developed countries like Italy ($2.4 trillion) and Canada ($2.33 trillion). According to UBS, gold prices have doubled since FY20, significantly boosting Indian household wealth. The bank forecasts prices to rise further to $3,500 per ounce by 2026, driven by global uncertainties such as trade tensions, inflation, and geopolitical risks. While UBS expects gold volume demand in India to soften in FY26, high prices will keep net imports elevated at $55–60 billion, or about 1.2% of GDP. Despite record prices, gold demand in India held up well in FY25, with consumer demand at 782 tonnes—15% above the pre-pandemic average. Jewellery demand softened slightly, but retail investment in gold bars and coins jumped 25% YoY, supported by a cut in customs duty from 15% to 6% in mid-2024. Looking ahead, UBS projects gold demand to moderate to 725 tonnes in FY26, before recovering to 800 tonnes in FY27 as household consumption stabilises. A key factor behind this recovery could be a $55 billion pay boost expected from the 8th Central Pay Commission, which tends to increase physical savings—particularly in real estate and gold. Live Events While India's gold reserves are impressive, efforts to monetise this wealth have largely fallen short. UBS notes that less than 2% of household gold is used as collateral for loans, despite attempts by banks and NBFCs to expand in this segment. Bajaj Finance , Shriram Finance , and Chola are among the financial firms increasing their exposure to gold-backed lending. However, structural barriers—such as emotional attachment to gold jewellery—have limited the success of initiatives like the Gold Monetization Scheme (GMS) and Sovereign Gold Bonds (SGBs). UBS also points out that SGBs were discontinued in February 2024, partly due to rising gold prices and growing liabilities for the government. That said, India's current account deficit remains manageable, despite the heavy import burden of gold. UBS attributes this to buffers built post-pandemic, including a strong services trade surplus and robust remittance flows, which help offset gold-related outflows. Also Read: IT stocks up 35% in less than 2 months. Can it withstand Fed caution and geopolitical risk? With 14% of the world's private gold stock, India continues to be the largest private holder of gold globally. As UBS puts it, Indian households are not just sentimentally attached to gold—they're growing wealthier because of it. And in a world of uncertainty, India's age-old trust in gold seems to be paying off.
India.com
a day ago
- India.com
Indian Money In Swiss Banks Down 18% In Last 10 Years, Check How Much Money Pakistan and Bangladesh Have In Swiss Bank
New Delhi: According to the latest data from the Swiss National Bank (SNB), deposits by Indian customers in Swiss banks have dropped by about 18% over the past ten years. ANI reported that the amount fell from roughly 425 million Swiss francs in 2015 to 346 million Swiss francs in 2024. During the COVID-19 pandemic, Indian deposits in Swiss banks saw a sharp rise, reaching a 10-year high of around 602 million Swiss francs. However, after the pandemic, the deposits started to decline again. In 2023, the deposits stood at 309 million Swiss francs and increased slightly by 37 million Swiss francs in 2024. Despite this small rise, the overall trend over the decade remains downward. ANI quoted experts saying that this fall could be due to stricter banking regulations, more scrutiny on foreign funds, and changes in international financial transparency rules. The decline is not unique to India. Deposits by American nationals in Swiss banks fell dramatically, from 64.2 billion Swiss francs in 2015 to 24.4 billion Swiss francs in 2024—a drop of about 62%. Similarly, Chinese deposits decreased from 5.01 billion Swiss francs to 4.3 billion Swiss francs during the same period. India's neighbors also saw big declines. Deposits by Pakistani nationals dropped from 947 million Swiss francs in 2015 to 241 million Swiss francs in 2024, a fall of nearly 75%. Bangladeshi nationals' deposits fell from 48 million Swiss francs to just 12.6 million Swiss francs, a decrease of over 73%, ANI reported.
