Introduction
Regulatory uncertainty is negatively impacting the valuation of UBS and other European banks, according to UBS CEO Sergio Ermotti.
Context
Speaking at an event in Zurich, Ermotti noted that European banks, including UBS, are currently subject to a
20% discount in valuation due to unpredictability surrounding regulatory frameworks. This situation is exacerbated by UBS's ongoing integration of former competitor Credit Suisse, which adds further complexity to the bank's operations.
Developments
UBS's challenges are heightened by the Swiss government’s forthcoming updates to banking regulations in response to Credit Suisse's collapse in 2023. An initial proposal outlining future capital requirements for Switzerland's major banks is expected to be announced in early June. Ermotti emphasized the concern that if UBS is subject to
50% higher minimum capital requirements than its U.S. counterparts, it would hinder the bank's competitiveness against large players such as Bank of America, Morgan Stanley, and Goldman Sachs.
Conclusion
Overall, the uncertainty surrounding both European regulations and UBS's integration of Credit Suisse poses significant challenges for the bank, with potential long-term implications for its operational viability and market position.
