Incoming Swiss banking chief warns against regulatory over-reach

Philipp Hildebrand, the incoming chairman of the Swiss Bankers Association, has cautioned against over-regulating the Swiss banking sector in the aftermath of Credit Suisse's collapse. He highlighted the importance of avoiding an overzealous response that could harm the competitiveness of Switzerland's financial industry. This perspective comes as Switzerland considers new rules to prevent future bank failures, particularly concerning "too big to fail" institutions.

Hildebrand's comments echo sentiments from other key figures in Swiss finance, including UBS CEO Sergio Ermotti and Vontobel co-CEO Christel Rendu de Lint. Ermotti has consistently warned that excessive regulation across the board is a major problem for Europe, stifling innovation and growth, and could even lead UBS to consider moving its headquarters if proposed capital requirements are deemed disproportionate. He specifically criticized the Swiss government's proposed reforms as not being internationally aligned and imposing capital requirements $20 billion higher than peers.

Vontobel also emphasized the need to safeguard Switzerland's competitiveness, with Rendu de Lint stating that while over-regulation is not good, looser rules are not always better. The Swiss government is preparing to unveil reforms to its "too-big-to-fail" regime, which could require UBS to increase its capital by as much as $26 billion through full capitalization of foreign subsidiaries and grant more powers to the regulator FINMA.

The Swiss Bankers Association (SBA) has also voiced concerns, calling the proposed regulatory package "too extensive" and warning that FINMA could become a "super-regulator" with its expanded powers. The SBA supports targeted improvements but argues that the crisis of a single bank does not justify blanket tightening for others, especially when other financial centers are reducing regulation to strengthen competitiveness. They also expressed support for an accountability regime for senior executives, provided it doesn't lead to formal and costly additional regulation.