Low Interest Rates ‘Huge’ Challenge to UBS, Axel Weber Says

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UBS Group AG is facing a “huge challenge” in its home market after the Swiss National Bank abandoned its cap on the franc, Chairman Axel Weber said.

The central bank’s decision, which was accompanied by a cut in interest rates, aggravated conditions that are “anything but ideal” for Switzerland’s biggest bank, Weber said in comments prepared for Thursday’s meeting with shareholders.

“More than ever, national economies, markets, and exchange rates are driven hither and thither by the actions of central banks,” the UBS chairman said. “Mountains of debt piled high by governments are getting bigger all around the world, while interest rates are heading towards zero or below.”

Chief Executive Officer Sergio Ermotti devoted much of his speech to regulation, saying he was “sometimes surprised by how academically or dogmatically new regulations are put forward.”

“And it concerns me when proposals are discussed superficially without giving any real thought to the effect they will have on the real economy,” he said.

Regulators around the world have turned up the pressure on banks in response to excesses that provoked the financial crisis. The Swiss government, which bailed out UBS in 2008, announced plans earlier this year to tighten capital requirements. Referring to two measures of financial strength, the government said the rules should be among the world’s highest requirements with regard to both risk-weighted capital and the unweighted leverage ratio.

Swiss Economy

While he is not calling for current regulation to be abolished, too much regulation will ultimately weaken the Swiss economy and jeopardize the country’s prosperity, Ermotti said, without mentioning the Swiss proposals. “What I wish for is that politicians maintain a sense of proportion when making decisions,” he said.

Several shareholders took the podium and criticized the management’s pay in light of UBS’s legal entanglements, notably a looming fine for attempting to rig foreign exchange rates.

Shareholder Ernst Schmid called Ermotti “telegenic.” We don’t begrudge him the women’s swooning,’’ Schmid said, while questioning why the CEO had to be paid like a movie star.

Not all speakers were welcomed by the shareholders present. Some were booed when they overran the allotted speaking time. One, Robert Glasz, wore a cap with a red communist star embroidered on it and was describing his experiences on a recent trip to the Democratic People’s Republic of Korea when the chairman turned off his microphone for speaking too long.

Binding Vote

UBS shareholders cast a binding vote on management and board compensation for the first time today, under a rule designed to curb excessive compensation that applies to all publicly-traded Swiss companies. They voted on the executive board’s bonuses for 2014 and for fixed pay in 2016, respectively.

The board of directors’ maximum pay for the period until the next shareholder meeting was also the subject to a majority decision. Shareholders voted in favor of all the board’s proposals, authorized the proposed pay, and elected Jes Staley as a member of the board.

(Updates with voting results of shareholder meeting from eighth paragraph.)
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