Financial Regulatory Forum

Banks see damage from tighter Swiss regulation

September 25, 2009

UBS/TAX   By Emma Thomasson
   ZURICH, Sept 25 (Reuters) – Swiss bank UBS <UBSN.VX> said new capital rules could put the country’s financial industry at an international disadvantage as it struggles to rebrand itself after bank secrecy was relaxed.
   “It is dangerous for the international competitiveness of the Swiss financial industry if the regulators in Switzerland turn the screws tighter and quicker than happens in other financial centres,” chief executive Oswald Gruebel said.
   In a speech on Friday at a KOF Swiss Economic Institute event, Gruebel said Swiss banks would have to work harder to attract customers since Switzerland relaxed strict bank secrecy that helped make it the world’s biggest offshore centre.
   “If we want to differentiate ourselves from other financial centres in future we will have to concentrate more on managing the assets that we have than in the past,” he said.
   Gruebel welcomed news Switzerland would be taken off an international list of tax havens after signing the required 12th tax deal on Thursday ahead of a Group of 20 summit expected to discuss the fight against tax evasion. [ID:nLO95379]
   He said Swiss banks would seek to expand more in Asia where the tax question was less important, adding the offshore business would only be interesting in future in emerging markets as Europe and the United States clamp down on tax dodgers.
   UBS settled a tax probe with the U.S. government last month, agreeing to turn over the names of 4,450 American clients.
   The bank is struggling to recover from the credit crisis and the U.S. tax probe. Gruebel said while it was now stable and working towards profitability, that would take time.
   He rejected suggestions from Swiss regulators that UBS and its other large rival, Credit Suisse <CSGN.VX>, should be slimmed down to prevent future systemic risks to the economy, saying that could cut the size of the Swiss financial sector in half.
   
   BETTER FUNDED REGULATOR?
   Gruebel accepted the need for strong future regulation and said UBS would be prepared to pay more to fund the FINMA financial regulator, which he joked currently had an annual budget just a third that of the Zurich Opera House.
   Gruebel’s comments came as Swiss banks expressed concern new Swiss regulations on bonuses to limit excessive risk-taking could be a competitive disadvantage.
   On Friday, FINMA said it would finalise the new rules in early November, which will come into force on Jan. 1, although a year’s transition period is planned. [ID:nL3424404]
   The Swiss Bankers Association said the proposals went too far in interfering in company policy and would cause big administrative costs, particularly for smaller banks.
   “We expect in particular that international developments and the rules of foreign financial centres will be closely watched and that the Swiss rules will be adjusted if necessary,” it said in its written response to FINMA.
   Reforming pay schemes for bankers, blamed for fostering a high-risk corporate culture that led to heavy losses and taxpayer-funded bailouts, is a key topic at the Group of 20 summit that started on Thursday in Pittsburgh. [ID:nN25480100]
   Credit Suisse said the proposals could create serious competitive disadvantages and urged FINMA to coordinate with other international regulators before they come into force.
   “The proposal go too far in many areas and can therefore lead to competitive distortions,” the bank said.
   Gruebel did not make any comments on the bonus rules. UBS <UBSN.VX> <UBS.N> is supposed to comply with the rules this year already after it was forced to accept a government bailout.
   UBS said last year it was axing bonuses for top executives and linking future payouts to the bank’s results.  But it has faced criticism for recent big hikes in pay for investment bankers to retain key staff after the bonus cut. ((For FINMA statement: http://www.finma.ch/e/aktuell/pages/aktuell-sn-rs-verguetungssysteme-20090925.aspx)) ((Reuters messaging: emma.thomasson1.reuters.com@reuters.net; +41 58 306 7311))
 Keywords: SWISS/BANKS 
  
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 Friday, 25 September 2009 17:26:39RTRS [nLP584243] {EN}ENDS

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