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UBS, alongside three other systemically important banks operating in Switzerland, must face tougher capital requirements, the Swiss government said on Wednesday.
The Swiss government pitched a plan, including 22 measures aimed at regulating banks deemed “too big to fail”, in an effort to prevent a repeat of the crisis that caused Credit Suisse to collapse last year.
If approved, the measures could see limits placed on banker bonuses, more powers given to Switzerland's banking regulator Finma and see the country’s systemically important banks forced to increase the amount of capital on their books.
However, while the 209-page document outlined intentions for a “significant increase” in capital requirements, the measures stopped short of stating a specific figure. It said the new rules would likely have a significant impact on UBS.
UBS currently holds assets of around $1.7tn on its balance sheet, double the size of Switzerland’s annual economic output of around $800bn. A crisis similar to the one that prompted the failure of Credit Suisse would have major implications for the country’s economy.
Switzerland’s government, however, dismissed proposals allowing the state to assume temporary control of banks during a financial crisis, along with plans to impose growth restrictions on systemically important financial institutions.
Furthermore, the government rejected proposals to limit customer withdrawals, establish “resolution funds” for bailouts, and increase depositor protection through government-backed insurance schemes.
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Traders revised their expectations for Federal Reserve interest rate cuts on Wednesday as US inflation exceeded forecasts.
As reported by the Financial Times, bond yields surged, stocks dipped and projections for rate cuts over the summer were pushed back following official data indicating a 3.5 per cent increase in consumer prices for the year to March.
US President Joe Biden acknowledged the need for further action to address rising costs, stating, “Today’s report shows inflation has fallen more than 60 per cent from its peak, but we have more to do to lower costs for hard-working families.”
Meanwhile, former Treasury secretary Larry Summers warned against a rate cut in June, suggesting it would be a “dangerous and egregious error”.
While officials remain focused on achieving their 2 per cent inflation goal, the FT notes that recent data and the Federal Open Market Committee’s March minutes suggest that factors including higher oil prices and housing costs may delay rate cuts until November.
Prior to Wednesday’s release, markets had expected between two and three rate cuts this year.
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Société Générale is selling its equipment financing division to French rival Groupe BPCE as part of a strategy to simplify its business model under the leadership of CEO Slawomir Krupa.
The sale, valued at €1.1bn, involves Groupe BPCE taking over most of SocGen’s equipment financing activities. The division provides financing and leasing services to various sectors including transport, industrial equipment, technology, medical and renewable energy.
The division currently holds an outstanding loan book of €15bn and amounts to €8bn in risk-weighted assets at SocGen. The sale is expected to conclude in the first quarter of 2025.
Krupa said in a statement that SocGen aspires to become a “rock-solid and sustainable top-tier European bank” and the sale of its equipment finance division “illustrates the strategic roadmap’s execution that creates value for all our stakeholders”.
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The European Bank for Reconstruction and Development has reported a profit of €2.1bn for 2023. This figure marks a significant turnaround from the €1.1bn losses incurred by the development bank in 2022, following Russia’s invasion of Ukraine.
In a statement released on Wednesday, the EBRD said its positive results were largely attributed to a €1bn return on its equity investments across its regions of operation.
In 2023, the EBRD’s board approved a €4bn capital increase, aiming to double its investments in Ukraine once reconstruction begins. Additionally, the bank has begun the process of expanding its membership to sub-Saharan countries including Ghana, Senegal and Côte d'Ivoire.
Earlier this year, the bank announced that its 2023 investments reached a record high of €13.1bn, with half of the total financing allocated to the green economy. The EBRD has pledged to make the majority of its investments green by 2025.
Soha El-Turky, the EBRD’s chief financial officer, stated in the release: “With global challenges such as the climate crisis, macroeconomic uncertainties, and geopolitical tensions growing more acute, the EBRD has the capacity to accelerate its support for clients and countries of operation.”
