By Noele Illien
BASEL, Switzerland (Reuters) -UBS executives on Wednesday told shareholders that the bank has major concerns about the Swiss government’s recently announced plan to hit the country’s largest lender with tougher capital requirements.
Switzerland’s government laid out plans two weeks ago for how to police banks deemed “too big to fail” to shield the country from a repeat of the collapse of Credit Suisse. “We are seriously concerned about some of the discussions related to additional capital requirements,” UBS Chairman Colm Kelleher said at the bank’s annual general meeting in Basel.
“Additional capital is the wrong remedy.”
UBS might need to find $15 billion to $25 billion in additional capital to comply with the proposed new requirements.
The Zurich-based UBS acquired its long-term rival last year following Credit Suisse’s meltdown that roiled global financial markets and stirred fears that the enlarged bank could upend the Swiss economy if it ran into trouble.
Shares in UBS were trading down by more than 2% on Wednesday afternoon, underperforming European peers.
The takeover prompted the government to craft a plan aimed at making the banking system more robust and to prevent a possible UBS collapse, although the timeline for changes remains unclear with a long legislative process still pending.
Despite this prospect of tougher capital rules, Kelleher said UBS remained committed to distributing excess capital to shareholders via dividends and share repurchases.
“UBS is not too big to fail,” he said, noting that it was one of the best-capitalized banks in Europe.
He said the aim is for total capital returns to exceed pre-acquisition levels by 2026.
Speaking at the meeting, UBS CEO Sergio Ermotti said the merger of the Swiss entities of the two banks should occur before the end of the third quarter, and that difficult decisions still lay ahead during the Credit Suisse integration.
“Despite our efforts to lessen the impact, in the short to medium term we will need to part ways with some colleagues,” Ermotti said after a weekend media report said the bank was planning five rounds of lay-offs in the coming months.
Ermotti’s 14.4 million Swiss franc ($15.75 million) pay for nine months of 2023, which made him the highest-paid banker in Europe, was heavily criticized by a number of shareholders before a vote was held on the pay package.
Kelleher defended the CEO’s pay.
“He arguably has the toughest job in the financial services industry globally, and he has delivered,” Kelleher said.
