The Zhitong Finance App learned that UBS Group (UBS.US) CEO Sergio Ermotti said that in the process of integrating Credit Suisse's business, UBS has increased its regulatory reserves by nearly $20 billion, although the Swiss government plans to raise capital requirements starting next year.
Ermotti said during an earnings call on Tuesday that “Credit Suisse's capital treatment is fully consistent with our more stringent practices” and will increase capital requirements by about $9 billion. In addition to this, he added, “progressive capital addition” would raise the capital requirement by about $10 billion.
However, the regulatory environment is likely to be further tightened in the next few years.
The Swiss government said last month that it wants systemically important banks to drastically raise the capital of their overseas subsidiaries. This is part of the reforms aimed at strengthening the country's banking sector after Credit Suisse went bankrupt last year. A person familiar with the matter said at the time that this could cause UBS an additional capital requirement of about 20 billion US dollars.
The capital and liquidity requirements in the Swiss reform plan are separate from the requirements resulting from the final implementation of Basel III (Basel III) next year. Swiss regulators have separated global banks from important domestic banks, giving officials the ability to classify UBS, whose balance sheet is twice the size of the local economy, into their own category.
Ermotti said, “If implemented consistently and consistently, the Basel III requirements that UBS and its global peers must abide by are strong.” “They are also being drastically tightened.”
Ermotti reiterated that it is “too early” to speculate or comment on the potential impact of Swiss banking reforms. He said UBS needed a full understanding of the situation to respond because the bank did not participate in the consultation process on the proposal.
Earlier this year, UBS announced it would resume its share repurchase program after completing a legal merger with Credit Suisse at the end of May. The bank said it will buy back up to 2 billion US dollars of shares within the next two years. Despite possible changes in capital requirements, the plan remains unchanged.
Ermotti said that shareholders and structurally subordinate bondholders have about $200 billion in loss absorption capacity, and investors “bear enormous costs and risks to ensure that taxpayers are not harmed in the unlikely event that UBS is affected by a major systemic event.”