UBS Breakup: Switzerland Loses Itself in Regulatory Debates on Side Issues

Summary

Two years after Credit Suisse's takeover by UBS, Switzerland is engaged in an intense debate about proper banking regulation. The commentary by Beatrice Bösiger criticizes many proposed measures as ineffective – particularly the recurring demand for UBS breakup by Christoph Blocher. The author argues that such measures offer no real solution, while valuable time is being wasted and the international competitiveness of Switzerland's financial sector is endangered.

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Detailed Summary

The article analyzes the ongoing debate on banking regulation in Switzerland and criticizes its tenor. Beatrice Bösiger compares the current situation to a football discussion where many participate without substantive knowledge. She distinguishes between sensible and less sensible regulatory proposals.

The author counts internationally consensus-based measures among sensible actions, such as stronger supervision of top management by the financial market regulator or faster provision of liquidity by the Swiss National Bank during crises. These points are already included in the package of measures presented by Finance Minister Karin Keller-Sutter in summer.

The UBS breakup is discussed as a classic negative example. The most prominent proponent of this idea is SVP politician Christoph Blocher, who wants to split the bank into a Swiss and an American unit. The concept is based on the assumption that a smaller bank is automatically associated with smaller risks. Bösiger convincingly refutes this logic: Credit Suisse's greatest scandals (Archegos, Greensill) did not occur in the risky investment banking division, but in supposedly safe sectors such as wealth management and asset management. These cases caused billions in losses and permanently destroyed trust in the bank.

The central message is that a breakup amounts to nothing more than a placebo: Even a smaller, purely Swiss UBS could become a taxpayer problem in a crisis. Furthermore, the question arises of what services such a shrunken bank could still offer its wealthy clients. Sergio Ermotti, UBS bank chief, categorically rejects such shrinking.

A second point of criticism concerns the loss of time. More than two years after Credit Suisse's collapse, banking reform is far from complete. The initial momentum has dissipated. While center-right parliamentarians have launched a compromise proposal, the rift between Karin Keller-Sutter and UBS remains entrenched.

Internationally, close attention is being paid to how Switzerland positions its financial center. Colm Kelleher, UBS chairman, has accused Switzerland of an identity crisis regarding its role in the global financial industry – too many unfocused regulatory proposals contribute to this. The «Financial Times» even asked this week: «Is Switzerland losing its place in the world?» With increasing deregulation trends in the US and Britain, Switzerland's financial center urgently needs legal certainty and clear signals.

Key Takeaways

• Most discussed regulatory proposals are either already international consensus or ineffective – they waste valuable time
• UBS breakup is not an appropriate means for risk reduction; the greatest CS scandals occurred in "safe" areas, not in investment banking
• A smaller, shrinking UBS would endanger its competitiveness and would not solve the problems
• Taxpayers would also have to bail out a broken-up UBS in times of crisis
• The Swiss financial center is losing credibility internationally due to too many unfocused debates
• Parliament must act quickly and create clear regulatory frameworks before Switzerland loses further competitiveness compared to deregulating countries like the USA and Britain

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