UBS Needs Proper Oversight More Than Extra Capital
The Swiss bank’s rescue of Credit Suisse is going better than hoped, but potential regulatory demands still cast a cloud.
Sergio Ermotti, CEO of UBS, has overseen a faster than anticipated integration of Credit Suisse.
Photographer: Pascal Mora/BloombergUBS Group AG is racing through its integration of the old Credit Suisse and hitting its targets ahead of schedule, which helped the Swiss bank beat analysts profit forecasts again in the third-quarter results reported Wednesday. Its bankers are bringing in more deals and its wealth advisers are getting rich clients to spend more.
The cloud hanging over this is the wait for Swiss authorities to decide whether the country’s only megabank needs more capital to protect taxpayers from the risk that UBS ever fails. This remains the big unknown and will have a big impact on returns to investors over the next couple of years. With the bank’s balance sheet twice the size of the Swiss economy, regulators need to get this right. But any extra capital demands must be shown to meet specific risks and be well calibrated, not based on a nervy finger-in-the-air prognosis mainly designed for political comfort.