UBS Opposes "Wrong Solution" to 27 Trillion Capital Increase Order

UBS Opposes 27 Trillion Capital Increase Plan

Swiss global investment bank UBS is protesting against the Swiss government's demand to increase its capital, calling it unfair. Last year, UBS expanded its size by acquiring Credit Suisse (CS). In response, the Swiss Federal Government is showing signs of imposing regulations such as capital increases on UBS.

On the 25th (local time), according to the Swiss Federal Government, the Federal Council, composed of seven federal ministers, recently demanded that UBS increase its capital to address management risks of its overseas subsidiaries. The additional capital amount proposed was $20 billion (approximately 27.4 trillion won).

UBS photo. [Photo by AFP Yonhap News]

Last month, the IMF recommended that UBS, which became a giant integrated bank through the acquisition of CS, could do more harm than good to the Swiss economy, and urged financial authorities to strengthen supervisory powers to properly control UBS's operations. The Financial Stability Board (FSB) under the Group of Twenty (G20) also demanded that the Swiss government strengthen control over UBS.

The Swiss Federal Government introduced these regulatory measures to prevent a recurrence of the CS crisis, which faced bankruptcy due to investment losses. The intention is to prepare additional capital to guard against risks that may arise in its overseas business network.

UBS is opposing these regulations. At the annual general meeting held on the 24th (local time) in Basel, Switzerland, UBS Chairman of the Board, Kom Kellerher, said, "We are seriously concerned about the additional capital requirements ordered by the Federal Government," and added, "It is a misguided solution." He further argued, "Regulations must ensure fair competition and align with global standards," and claimed, "The CS crisis occurred not because of a lack of capital but due to a business model whose credibility was critically damaged."

UBS is expected to continue opposing the Swiss Federal Government's capital increase demands. UBS maintains that it already has sufficient capital to reduce risks, and that such capital increases would disadvantage not only shareholders but also the bank's customers.

Meanwhile, UBS's capital increase plan must go through discussions in the Swiss Federal Government's parliament and legal enforcement procedures.