“Go West”: Why UBS Still Dreams of America, Provoking Bern

The Swiss government, through Finance Minister Karin Keller-Sutter, is signaling a firm stance against unchecked foreign expansion by its major banks, particularly UBS. The proposed stricter capital rules are a direct response to UBS's ambitious plans in the United States, with Keller-Sutter asserting that "taxpayer money effectively subsidizes growth." This move underscores a national concern about the risks associated with large financial institutions' global ambitions and the potential burden on Swiss taxpayers.

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Yes, the US business can become more expensive for UBS.

For UBS, led by CEO Sergio Ermotti and Chairman Colm Kelleher, the US represents a vital growth frontier. They see significant potential to expand their presence and market share in a country teeming with wealth. However, the new regulations, which mandate that foreign holdings be fully backed by core equity capital, would make acquisitions significantly more costly. This creates a direct conflict between the bank's strategic vision and the government's prudent risk management.

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In fact, the taxpayer subsidizes the growth.

Switzerland's history with US financial markets is fraught with peril. From the controversy over dormant assets from World War II to the 2008 financial crisis that nearly bankrupted UBS due to toxic US securities, the lessons have been harsh. The collapse of Credit Suisse also had significant roots in its US investment banking operations. Yet, the allure of the US market, described as the "land of millionaires and financial crises," persists for Swiss bankers, who view it as essential for wealth management and global competitiveness. The NZZ highlights this ongoing tension between national financial prudence and the global aspirations of its banking giants.

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We see potential to expand our presence and market share there.