Boston, MA 11/05/2013 (wallstreetpr) – UBS AG (NYSE:UBS) is the Swiss largest bank and together with its Swiss peers the bank is facing regulatory measures that could put it a competitive disadvantage against global rivals. The bank now has to do all that it can to convince domestic regulators that while avoiding a repeat of the 2008 financial crisis is necessary, it is important to take an approach that would not put more ammunition in the hands of rivals. Otherwise, the capital rule fronted by the Swiss lawmakers could see the bank erode the gains that it had made since crippling financial recession which saw it seek government intervention for bailout.
The new capital rule requires Swiss banks to hold far more capital in efforts aimed at curbing borrowing, this tougher measure has come to be known as ‘Swiss finish” as it would effectively blunt the competitive edge of UBS and all other domestic lenders. For UBS, being subjected to a leverage ratio of 6-10%, against the 3% that is imposed on global banks would be a bitter pill to swallow considering that revenue from lending activities contributes a significantly to the banks overall revenue.
The bank offers client-focused financial solutions which cover asset management, wealth management and investment banking. Its operations span regional and global sphere. While its global operations would not be impacted directly by the tougher capital leverage measures proposed domestically, reduced home lending capability would no doubt have ripple effect on its various business segments.
In any case, other nations like the U.S. Netherlands and Britain are also pushing for higher banking standards in efforts to curb a slide to the ugly financial situation of the 2008/9.
If the higher leverage ratio proposal goes through, UBS would be forced to have between 6 and 10 Swiss francs of equity in every 100 Swiss francs of asset. The banks are already facing a 4.3 capital leverage by 2019.
