New Swiss financial institution legal guidelines may derail UBS’ problem to Wall Street giants | USAEMALL.com

Switzerland’s robust new banking laws create a “lose-lose situation” for UBS and will restrict its potential to problem Wall Street giants, in line with Beat Wittmann, accomplice at Zurich-based Porta Advisors.

In a 209-page plan revealed Wednesday, the Swiss authorities proposed 22 measures geared toward tightening its policing of banks deemed “too big to fail,” a yr after authorities had been compelled to dealer the emergency rescue of Credit Suisse by UBS.

The government-backed takeover was the most important merger of two systemically necessary banks for the reason that Global Financial Crisis.

At $1.7 trillion, the UBS steadiness sheet is now double the nation’s annual GDP, prompting enhanced scrutiny of the protections surrounding the Swiss banking sector and the broader economic system within the wake of the Credit Suisse collapse.

Speaking to CNBC’s “Squawk Box Europe” on Thursday, Wittmann mentioned that the autumn 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 further powers to the Swiss Financial Market Supervisory Authority, making use of capital surcharges and fortifying the monetary place of subsidiaries — however stopped in need of recommending a “blanket increase” in capital necessities.

Wittman recommended the report does nothing to assuage issues in regards to the skill of politicians and regulators to supervise banks whereas making certain their world competitiveness, saying it “creates a lose-lose situation for Switzerland as a financial center and for UBS not to be able to develop its potential.”

He argued that regulatory reform must be prioritized over tightening the screws on the nation’s largest banks, if UBS is to capitalize on its newfound scale and eventually problem the likes of Goldman Sachs, JPMorgan, Citigroup and Morgan Stanley — which have equally sized steadiness sheets, however commerce at s a lot increased valuation.

“It comes down to the regulatory level playing field. It’s about competences of course and then about the incentives and the regulatory framework, and the regulatory framework like capital requirements is a global level exercise,” Wittmann mentioned.

“It cannot be that Switzerland or any other jurisdiction is imposing very, very different rules and levels there — that doesn’t make any sense, then you cannot really compete.”

In order for UBS to optimize its potential, Wittmann argued that the Swiss regulatory regime ought to come into line with that in Frankfurt, London and New York, however mentioned that the Wednesday report confirmed “no will to engage in any relevant reforms” that will defend the Swiss economic system and taxpayers, however allow UBS to “catch up to global players and U.S. valuations.”

“The track record of the policymakers in Switzerland is that we had three global systemically relevant banks, and we have now one left, and these cases were the direct result of insufficient regulation and the enforcement of the regulation,” he mentioned.

“FINMA had all the legal backdrop, the instruments in place to address the situation but they didn’t apply it — that’s the point — and now we talk about fines, and that sounds like pennywise and pound foolish to me.”