00:00 Speaker A <\/p>\n
The Swiss upper house has basically effectively backed what has been called a compromise, not much of a compromise in spec from Sergio Ermotti’s point of view, uh for a 90% CT1 foreign unit uh requirement. Now, remember that the government had asked for 100%, so we’ve backed off that a little bit, but UBS was looking for maybe 50-50 CT1 AT1 split, uh which it said earlier this week would be acceptable. Jan Henrik Forster, uh joining us now. Bloomberg’s Swiss Bureau Chief. Good morning. I imagine Sergio Ermotti is not going to be a happy man this morning. <\/p>\n
00:33 Jan-Henrik Foerster <\/p>\n
No. 90%, 100% uh that I think in this context doesn’t really matter. It is not the outcome uh UBS wanted. Uh in fact, Sergio Motty said earlier that this is kind of close to a worst case scenario. 90% or 100% capital backing for its foreign subsidiaries. Um and you know, this also explains the stock price reaction. This is just now the first vote. It’s um been taken in the upper house. Um the vote is clear and now it’s going to the lower house which represents basically the people. Upper house is representing the cantons. You know, this was a very interesting session. The Swiss Finance Minister, Karin Keller-Zuter. She uh came very prepared, basically dismantled all of UBS’s arguments, um going into incredible detail on, you know, for for instance, what does a a higher CT1 ratio, how does it impact financing costs, how does UBS’s CT1 ratio post 100% or 90% capital backing compares to peers. So, it it was a very, um, very interesting session with her. So, the impact is now clear. UBS won’t like this outcome, will lower returns. <\/p>\n
01:52 Speaker B <\/p>\n
And the reason that this matters then, Jan Henrik, is because the banking sector cares very much about, you know, how hard it’s able to work its balance sheet, what it’s able to do with that capital and how much it has to keep in reserve. And the more it has to keep in reserve, the theory is it will have it will end up being less competitive. But that was, as you say, not an argument that held water with the Swiss Finance Minister. <\/p>\n
02:16 Jan-Henrik Foerster <\/p>\n
Correct. Well, at the very core, this is about should the Swiss taxpayer be on the hook for UBS’s businesses abroad. This is mainly about the US business and investment banking. The more capital you need to hold, um the lower your returns will be. That’s bad for shareholders, it’s bad for UBS employees and also it makes um UBS at least on paper somewhat less competitive to its peers. Now, um Karin Kella Sudo or the Swiss government is arguing, look, when over the past two decades, we had two major banking crisis. We can’t afford this again, we don’t want this again. So, you know, we have to kind of we have to kind of make sure that the Swiss taxpayer is not on the hook. It goes even deeper, you can also say, oh, this is probably, you know, they’re overshooting on regulation and you know, just a thought at the very heart of it, this is a question about should a bank be a force of capitalism or a utility like a grid or a telecoms firm. Um and there are obviously two views here. <\/p>\n
03:22 Speaker A <\/p>\n
very much so. Um is there a I’ve I’ve asked the question, you and I’ve talked about it. Sergio has never really given an answer. We’ve asked him so many times, what do you want? Is there an argument from shareholders to say, you came too late to this. You didn’t lay out your plan early enough and therefore didn’t allow significant debate around this. Is that is that a reasonable argument? My second quick question is, do you think Switzerland can redomicile? If this goes through, how serious is that threat about redomiciling? <\/p>\n
03:59 Jan-Henrik Foerster <\/p>\n
100%. On point one, I think probably he or Sergio would argue for tactical reasons, I wouldn’t say it because if my proposal would would have gone through, then people will say in Switzerland, oh, um the Swiss government is saying what UBS is dictating them. Actually that’s that argument is coming from Sergio Marti himself. I’m not so sure about it. I think UBS personally could have done a better job in explaining what’s at stake a priori to the vote. Um you know, it was a very emotional debate and maybe that was not the right way to go. On two, I think if 90% goes through now, it’s still a lengthy progress, right? One year maybe. Um UBS will probably have to think about the question how important is the US business for us and how important is investment banking, which is usually the capital heavy part of of a bank. Uh how how relevant is that business to us and maybe we need to make tweaks here and there. And I’m not talking about the nuclear option of a possible relocation, but yes, I mean, this discussion will come up again and I’m pretty sure UBS’s board led by Colm Keller will be deliberating those options. <\/p>\n
05:22 Speaker B <\/p>\n
Okay, and we’ve seen tweets to the share price this morning. So, it’s been down, then up, then down a little bit. now down by 3 4\/10. <\/p>\n","protected":false},"excerpt":{"rendered":"00:00 Speaker A The Swiss upper house has basically effectively backed what has been called a compromise, not…\n","protected":false},"author":2,"featured_media":136212,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[129],"tags":[6436,223],"class_list":["post-136211","post","type-post","status-publish","format-standard","has-post-thumbnail","category-ubs","tag-capital-requirements","tag-ubs"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ch\/117331632184093141","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/136211","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/comments?post=136211"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/136211\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media\/136212"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media?parent=136211"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/categories?post=136211"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/tags?post=136211"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}