Swiss plan to raise leverage ratio unrealistic: UBS chief

Dec 16 2013, 04:00 IST
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SummarySwitzerland’s plan to raise the leverage ratio required of banks is unrealistic, the chief executive of top Swiss bank UBS

Switzerland’s plan to raise the leverage ratio required of banks is unrealistic, the chief executive of top Swiss bank UBS said in a newspaper interview published on Sunday.

Last month, Switzerland’s finance minister had said the country’s banks should be subject to a leverage ratio of between 6% and 10%, against the 3% for global banks under rules that come into force in 2018.

“On the requirement for 6-10%, all I can say is that this is an unrealistically high demand,” Sergio Ermotti told the Schweiz am Sonntag newspaper, noting that Swiss regulators already required more than their peers abroad.

Such a policy would lead to higher interest rates on mortgages and corporate loans, and end banks’ ability to offer favourable loans, which had benefited the Swiss economy for the past 50 years, he said.

“Already about 25% of Swiss banks are earning no money and another 25% have such low margins that they are unlikely to survive in the long term,” he said. Regulators should not focus exclusively on the leverage ratio, but also take into account a bank’s risk weighting and stress tests, he said.

“It’s time for regulators to agree quickly instead of making statements on any single financial measure,” Ermotti said. He also said that it was not constructive to be talking about imposing new requirements when the existing ones had not yet been put fully in place.

On Thursday, the Swiss National Bank urged UBS and Credit Suisse to improve capital and leverage ratios, which it said would be a major focus in the event of a crisis.

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