Shaken by crises, Switzerland fetters UBS's global dream

BERN, June 6 (Reuters) - Switzerland announced reforms on Friday to make its biggest bank UBS (UBSG.S), opens new tab 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.
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."

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Western Telegraph

an hour ago

• Western Telegraph

Ministers ‘abusing' anti-terror laws against Palestine activists

A protest organised by groups under the Palestine Coalition banner marched to Whitehall from Russell Square in central London on Saturday afternoon. Organisers estimated that 350,000 people attended the protest, with those marching waving Palestinian flags and chanting 'free, free Palestine' and 'stop bombing Iran'. We're not the terrorists - the ones that are literally killing children, they are the terrorists Humza Yousaf Many protesters chanted 'shame on you' as they walked past dozens of counter-protesters, organised by pro-Israeli group Stop The Hate, near Waterloo Bridge. The Metropolitan Police said a person was arrested after a bottle was thrown towards the counter-protesters. They added that 'a group appeared on Waterloo Bridge trying to block traffic' following the protest, with officers intervening to clear the road. The demonstrations come after reports on Friday that the Home Secretary will ban Palestine Action after the group vandalised two aircraft at RAF Brize Norton. Yvette Cooper has decided to proscribe the group, making it a criminal offence to belong to or support Palestine Action, after footage posted online showed two people inside the RAF base, with one appearing to spray paint into an aircraft's jet engine. Addressing crowds at the national march for Palestine in Whitehall, former SNP leader Mr Yousaf said: 'While we stand a stone's throw from Downing Street, let's make it clear to the Prime Minister: You try to intimidate us with your anti-terror laws by abusing them, but you'll never silence us as we speak out against the genocide that you're supporting. 'We're not the terrorists – the ones that are literally killing children, they are the terrorists.' A pro-Palestine protester said it was 'absolutely horrendous' that the Government is preparing to ban Palestine Action. Paloma Faith speaking after a march organised by the Palestine Solidarity Campaign in London (Jeff Moore/PA) Artist Hannah Woodhouse, 61, told the PA news agency: 'The Government, since yesterday, have said they're also going to start to try to proscribe peace activists who are trying to take action against the genocide – so Palestine Action are now being targeted by our Government, which is absolutely horrendous.' Ms Woodhouse, who is from London, added: 'Counter-terrorism measures, it seems, are being used against non-violent peace protesters. 'The peace activists are trying to do the Government's job, which is to disarm Israel. The duty of any government right now is to disarm a genocidal state.' Musician Paloma Faith told pro-Palestine campaigners that she would not 'stick to music and stay away from politics'. Speaking to crowds at the march, the songwriter, 43, added: 'Those who facilitate these crimes against humanity need to be made accountable, not those of us who are compassionate and humane enough to stand against it.' Former Labour leader Jeremy Corbyn told protesters that politicians were seeking to 'turn people who protest against the invasion of Iran or the occupation of Palestine into terrorists'. Former Labour Party leader Jeremy Corbyn speaking after a march organised by the Palestine Solidarity Campaign, from Russell Square to Whitehall in central London (Jeff Moore/PA) Some protesters were carrying Iran flags, with others hoisting signs – distributed by the Islamic Human Rights Commission – that read 'choose the right side of history' alongside a photo of Iranian Supreme Leader Ayatollah Ali Khamenei. Human rights group Liberty said banning Palestine Action 'would be a huge step change in how counter-terror laws are applied'. Sam Grant, its external affairs director, said in a statement: 'Targeting a protest group with terrorism powers in this way is a shocking escalation of the Government's crackdown on protest and we urge the Home Secretary to rethink. 'It's clear the actions of Palestine Action don't meet the Government's own proportionality test to be proscribed as a terrorist group, but the consequences for the group's supporters if ministers go ahead would be heavy – with things like wearing their logo carrying prison sentences. 'This move needs to be viewed in light of the sustained crackdowns on protest we have seen from successive governments over recent years, and the worrying fact that there are more and more non-violent protesters spending years in prison.' The Palestine Coalition is comprised of a number of different groups, including the Palestine Solidarity Campaign and Stop The War.

The Guardian

an hour ago

• The Guardian

Cult of celebrity feels like a fundamental tension at the heart of the game

It is in the details that the truest picture emerges. Quite aside from the endless politicking, the forever-war with Uefa, the consorting with autocrats and the intriguing broadcast rights and partnership deals, there has been, not a new, but growing sense during the Club World Cup that Fifa doesn't really get football. There is something cargo-cultish about it, creating outcomes without engaging in processes. Perhaps that is inevitable with Gianni Infantino's style of leadership; like all populists, he is big on vision and short on practical reality. It was there in the expansion of the World Cup to 48 teams. OK: how will the tournament be organised? Sixteen groups of three. Won't that mean either lots of potential dead rubbers (one team from each group goes through) or opportunities for collusion (two go through)? Oh, actually, the four-team groups at the 2022 have worked so well, we'll go with 12 groups of four. Sure, but then you have eight best third-place teams going through which: a) diminishes jeopardy; and b) undermines sporting integrity by giving an advantage to teams in later groups because they have a clearer idea of what is needed to progress, again offering opportunities for collusion. No response, because all that matters is a bigger tournament equals more votes for the president and (in the short term) more revenue. One of the oddest aspects of the Club World Cup has been the way players are greeted on to the pitch individually, like swimmers before an Olympic final. At Ulsan HD v Mamelodi Sundowns, they may as well have gone on and introduced the crowd as well. Who needs this? Who wants this? Why does the first player out have to hang around for several minutes waiting for the 22nd player? For well over a century the two teams have walked out side by side. This has always been part of the gladiatorial ritual of football. This is the contest: one team against another. But as Fifa has sought desperately to improve attendances and stimulate interest, its focus has become more and more on the individual. That is why there was all that talk, much of it emanating from Infantino, about Cristiano Ronaldo potentially securing a short-term deal with a qualifier, and why qualifying was gerrymandered to ensure the presence of Lionel Messi's Inter Miami. But there is a potentially self-defeating short-termism to this. While the desire to see Messi is entirely understandable, especially as he enters the late autumn of his career, Inter Miami are sixth in MLS's Western Conference, their form having disintegrated since the end of March. From an MLS point of view, the ideal scenario would have been for one of their sides to beat a storied opponent, perhaps push on to the quarter-finals, generating interest in North America's domestic league. The best way of doing that would have been to have the best-possible MLS representation, but Inter Miami are in no sense one of the best three sides. As it is, none of the MLS sides won their opening game, although Porto's dismal form and Messi's dead-ball ability may get Inter Miami through anyway. It might also be pointed out that Auckland City are not the best side in New Zealand, nor are Red Bull Salzburg one of the best 12 sides in Europe, but the consequences are greater for the host nation, particularly when there is apparently so much potential for growth. The celebritisation of football is not new, but it is intensifying. When Paul Pogba returned to Manchester United in 2016 and, rather than speaking of the Premier League or becoming a European champion, said he dreamed of winning the Ballon d'Or, it felt shocking, a player elevating his own interests and a silly bauble above the glory of team success. But that has become normal. Improving his Ballon d'Or chances is one of the reasons Neymar left Barcelona for Paris Saint-Germain; even Trent Alexander-Arnold mentioned the Ballon d'Or as a motivation for joining Real Madrid (good luck with that from right-back). Sign up to Football Daily Kick off your evenings with the Guardian's take on the world of football after newsletter promotion The marketing of football is almost all focused on individuals. That's been particularly so at the Club World Cup, but it is true of almost every competition. Even the way lineups are introduced on Sky's Premier League coverage, with the players performing a fake celebration, seems designed to introduce them as characters. Yet there is a tension there. While individual players are celebrated, the increasing use of data means image and self-projection may never have mattered less. The stats will find the talent, even if the talent has no gift for self-promotion. At the same time, the best teams have never been so cohesive, so integrated. PSG provide a useful case study. For years they signed stars with seemingly little thought to how they might play together. Although their immense resources won them the French league, they habitually choked in Europe. Then there was a change of approach, the money was spent not on Neymar and Messi but on players on the way up who still had a hunger for success and who could play together. The result was the Champions League and, despite their defeat by Botafogo, possibly the inaugural world title in the expanded format. If it was conceived as a two-stage strategy – build the brand through celebrity, then win the actual competitions – it has worked to perfection; in reality, it's probably trial and error that has brought them to this point. At Real Madrid, meanwhile, Florentino Pérez still seems locked in his galáctico vision of football, insisting on adding Kylian Mbappé to a squad that already contained Vinícius Júnior and Rodrygo, resulting in imbalance and an expensive downturn in form. This goes deeper than transfer policies, though. This feels like a fundamental tension at the heart of the game. What, after all, is success in modern football? Manchester City for the past decade have been a much better football team than PSG, and yet they have nothing like the brand awareness. Is success winning trophies, or making money? Is it winning trophies or becoming more famous? Is it winning trophies or marketing the individual? The individual walk-ons only blur the lines further, suggest organisers who struggle with the concept that football, perhaps more than any other sport, is a game of the team.

Telegraph

an hour ago

• Telegraph

Labour must put energy security ahead of net zero ideology

British Government ministers appear to enjoy nothing quite so much as interfering with complex systems they don't entirely understand. Research commissioned by the Department for Energy Security and Net Zero has highlighted one set of clearly unintended consequences that could soon come about as a result of Energy Secretary Ed Miliband's fanatical pursuit of his 2050 target. Interactions between high temperatures, solar panels, heat pumps and the transmission network may result in a greater likelihood of 'electricity shortfalls and loadshedding', a polite euphemism for controlled blackouts. The driving mechanisms are straightforward: heat pumps, soon to be mandatory in newbuilds, and highly incentivised in older properties, offer cooling capabilities that are likely to increase electricity demand during hot periods. At the same time, Britain's distributed renewables grid will be more exposed to degradation of performance due to these same high temperatures as solar panel efficiency falls and transmission networks are pushed to their limit as carrying capacities fall, increasing 'the likelihood of widespread blackouts'. It is a fascinating combination of incentives and outcomes, particularly for a department with 'energy security' in its title. It is also an excellent illustration of why we should be deeply sceptical of government schemes that seek to remake society on a grand scale: the choices to push certain approaches has created this pathway to instability. It is far from the only way in which net zero puts energy security at risk. There are the dark, windless winter days where neither solar nor wind provide significant inputs into Britain's grid, potentially leaving us reliant on backup power sources – an additional source of capital costs – or on interconnectors to European countries, which may also find their generating capacity limited. At the other end of the spectrum, a report into Spain's April blackouts has highlighted that particularly sunny days may drive prices negative, causing producers to switch off in a cascading failure. Britain does at least seem to have learnt this lesson ahead of time, taking steps to prevent a similar incident here. As the UK report has highlighted, however, it would be foolish to assume perfect foresight of future risks. It is surely time the Government put energy security ahead of net zero ideology.