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UBS’s chair and chief executive have hit out at critics of the bank’s size and capital requirements in a letter to shareholders ahead of moves by the Swiss government to shore up the country’s banking system.
The lender has come under scrutiny within Switzerland following its rescue of former rival Credit Suisse a year ago, especially over the size of the combined group’s balance sheet — roughly twice the country’s gross domestic product.
The Swiss central bank recently called on regulators to review UBS’s capital requirements in light of its increased “systemic importance”.
In a letter to shareholders published alongside the bank’s annual results on Thursday, UBS chair Colm Kelleher and chief executive Sergio Ermotti said Credit Suisse failed due to a “broken business model” rather than a lack of capital.
“The fact that we were in a position to rescue Credit Suisse, despite both firms operating under the same regulatory regime, shows the framework and capital requirements were not the problem,” they wrote.
The pair also responded to criticism that the size of UBS within the Swiss market has harmed competition.
“The collapse of Credit Suisse unleashed an extraordinary race for clients, talent and market share in the Swiss banking market,” they wrote. “This is the ultimate proof that the competition provided by both domestic and foreign banks active in Switzerland is robust.”
The Swiss parliament is carrying out an investigation into the causes of the collapse of Credit Suisse, which will result in recommendations for improving the stability of the banking system. There is also a separate government review of the country’s “too-big-to-fail” regime, which is designed to safeguard important banks from collapse.
