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UBS’s chairman and chief executive criticized the bank’s size and capital requirements in a letter to shareholders ahead of the Swiss government’s moves to support the country’s banking system.
The lender has come under scrutiny in Switzerland following the bailout of former rival Credit Suisse a year ago, largely over the size of the combined group’s balance sheet – about double the country’s gross domestic product.
The Swiss central bank recently called on regulators to review UBS’s capital requirements in light of its growing “systemic importance.”
In a letter to shareholders published alongside the bank’s annual results on Thursday, UBS Chairman Colm Kelleher and Chief Executive Officer Sergio Ermotti said Credit Suisse failed due to a “broken business model” rather than a lack of capital .
“The fact that we were able to save Credit Suisse, despite both companies operating under the same regulatory regime, demonstrates that the regulatory framework and capital requirements were not the issue,” they wrote.
The two also responded to criticism that UBS’s size in the Swiss market would harm competition.
“The collapse of Credit Suisse has unleashed an extraordinary rush to grab clients, talent and market share in the Swiss banking market,” they wrote. “This is definitive proof that competition from domestic and foreign banks active in Switzerland is strong.”
The Swiss parliament is carrying out an investigation into the causes of the Credit Suisse collapse, which will lead to recommendations to improve the stability of the banking system. There is also a separate government review of the country’s “too big to fail” regime, designed to safeguard major banks from collapse.