“The finance minister’s comments left a bad taste and the risk of more regulation is still there, it’s just been put off into the future,” said Swisscanto’s Braendle. “Investors are still insecure.”
Bank executives have pushed back. Ermotti called the leverage requirement suggested by Widmer-Schlumpf an “unrealistically high demand,” Schweiz am Sonntag newspaper reported Dec. 15, citing an interview. Credit Suisse Chairman Urs Rohner said he doesn’t expect a tightening of the requirement will be necessary in 2015, according to an interview in Bilanz magazine this month.
The Swiss central bank, which was first to suggest the introduction of a leverage limit in the aftermath of the global financial crisis, considers the ratios of the two banks as “still below the average of large global banks,” SNB Vice President Jean-Pierre Danthine said in a speech Dec. 12.
“Economic and financial conditions for the Swiss banking sector continue to be challenging,” Danthine said. “For this reason, it is vital for the big banks to continue improving their capitalization, and in turn their resilience, particularly as regards the leverage ratio.”
Swiss regulators have shown a readiness to be tough on banks. Credit Suisse was forced to boost capital by 15.3 billion francs last year through a package of measures after the central bank’s demand for a “marked increase” sent the stock down more than 10 percent in one day.
The SNB this year declared Zuercher Kantonalbank, a regional state-owned lender a seventh of UBS’s size, systemically important, meaning it will have to fulfill stricter requirements.
Regulators elsewhere are also tightening the leash. The U.S. Federal Reserve and the Office of the Comptroller of the Currency proposed in July to ask the nation’s eight largest lenders to hold as much as 6 percent of equity capital in relation to their assets. Swedish banks, which have the highest capital ratios under Basel III rules among major European lenders, were told by the regulator last month to limit dividends and use surplus cash to pad buffers as risks in the property market grow.
“Swiss regulators are moving in the direction of tightening requirements for the whole Swiss banking system to be able to take the Swiss taxpayer off the hook in the future,” said Dirk Heise, the primary credit analyst for the nation’s banks at Standard & Poor’s. “We consider this as a moving target, and in an international context, regulations are subject to further enhancements as well.”
Moving-target regulation would make life “very complicated” for banks, Claude-Alain Margelisch, CEO of the Swiss Bankers Association, said last month. It may also repel investors, said Gruebel, 70, who cut assets and built up capital at UBS after the financial crisis while curbing dividends.
“You really have to ask yourself why you want to be a bank shareholder,” he said. “Banks are too expensive, you won’t get any dividends because the regulator will make sure that you don’t and in case the company gets into difficulty, shareholders get totally wiped out.”