UBS on the brink of Switzerland's 'too big to fail' reckoning
The Swiss government Wednesday announced steps to bolster its “too big to fail” rules aimed at avoiding potentially disastrous fallout from banking sector turmoil after woes last year at Credit Suisse before it was taken over by rival UBS.
At around $1.7 trillion,UBS's balance sheet is double the size of annual Swiss economic output, giving the bank an exceptional weight for a major economy.
Should UBS unravel, there are no local rivals left to absorb it. And the cost of nationalisation could shatter public finances, experts say.
The Swiss lower house of parliament in May 2023 backed a motion calling for systemically relevant banks to have aleverage ratio of 15% of assets, far more than in the European Union, the United States and Britain.
Based on common equity tier 1 capital of $79 billion,UBS had a 4.7% ratio at the end of 2023.
The higher ratio would likely leaveUBS needing to find well over $100 billion in additional equity, said Andreas Ita from consultancy Orbit36.
"This can't be done within a reasonable period by withholding profits, and raising such sums via capital markets is hardly realistic," Ita said.
"There is no plan B this time," he said. "The main policy will be hope– hope that UBS doesn't get into trouble. But hope is not a strategy."
>https://apnews.com/article/switzerland-banking-ubs-credit-suisse-956cc3d880c5d3bafc6b8d413f6306ad
>https://www.reuters.com/business/finance/ubs-brink-switzerlands-too-big-fail-reckoning-2024-04-08/