Kurer Says UBS, Credit Suisse Should Be Broken Up to Regain Investor Trust
UBS, Credit Suisse Should Be Broken Up, Ex-UBS Chairman Says
Chris Ratcliffe/Bloomberg
Credit Suisse and UBS, which are both cutting jobs and reorganizing their securities unit.
Credit Suisse and UBS, which are both cutting jobs and reorganizing their securities unit. Photographer: Chris Ratcliffe/Bloomberg
Nov. 16 (Bloomberg) -- Former UBS AG Chairman Peter Kurer discusses his view that UBS AG and Credit Suisse Group AG should split off their investment banks to regain the trust of investors and clients. He speaks from Zurich with Andrea Catherwood on Bloomberg Television's "Last Word." (Source: Bloomberg)
Nov. 16 (Bloomberg) -- UBS AG and Credit Suisse Group AG, Switzerland’s biggest banks, should split off their investment banks to regain the trust of investors and clients, former UBS Chairman Peter Kurer wrote in a commentary for Bloomberg View today. Simone Meier and Maryam Nemazee report on Bloomberg Television's "The Pulse." (Source: Bloomberg)
UBS AG (UBSN) and Credit Suisse Group AG (CSGN), Switzerland’s biggest banks, should split off their investment banks to regain the trust of investors and clients, former UBS Chairman Peter Kurer said.
“The only way to regain trust on a sustainable basis, is to separate the investment bank from the retail and private- banking units,” Kurer, 62, wrote in a commentary for Bloomberg View today. He said investment-banking units need to be “independently governed, funded and capitalized.”
Credit Suisse and UBS, which are both cutting jobs and reorganizing their securities unit as stricter capital requirements and Europe’s sovereign debt crisis hurt revenue, have reaffirmed their commitment to an integrated business model in the past weeks. The companies say their businesses benefit from close cooperation between units as wealth management clients can be referred to the investment bank and vice versa.
“The integrated model may, from an intellectual point of view, still be the superior one, and this may explain why the present managements defend it stubbornly,” Kurer wrote. “But it is outdated in terms of what can be sold to customers and the public.”
Kurer, who was UBS chairman for 12 months through April 2009, increased the separation between the bank’s securities unit and money management in 2008 after writedowns and losses at the investment bank from the credit crisis prompted rich clients to withdraw funds.
‘Highly Volatile’
“The highly volatile and accident-prone investment-banking business imports risks into the retail and wealth-management units, where clients are more conservative with their money,” he wrote.
The Swiss regulators’ efforts to alleviate the problems around too-big-to-fail institutions don’t go far enough as, instead of requiring a separation of consumer banking from investment banking like proposals in the U.K., the banks are only asked to draw up plans that can be used to split off the businesses important for Switzerland while the rest is being wound down, Kurer said. In the U.S., banks are prohibited from engaging in proprietary trading under the so-called Volcker Rule.
“This is an approach that will prove to be unworkable or at least falls short of the more effective requirements of the U.K. proposals or the U.S. regulations,” wrote Kurer, who worked as a corporate lawyer for more than 20 years before joining UBS as general counsel. “There are few who believe in a great future for investment banks; hardly anyone thinks that Swiss universal banks are good at running integrated investment banks.”
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