December 15, 2013 / 10:04 AM / 5 years ago

UBS chief says Swiss plan to raise leverage ratio is unrealistic

Swiss bank UBS Chief Executive Sergio Ermotti walks on the stage during the company's general shareholders meeting in Zurich May 2, 2013. REUTERS/Ruben Sprich

GENEVA (Reuters) - Switzerland’s plan to raise the leverage ratio required of banks is unrealistic, the chief executive of top Swiss bank UBS UBSN.VX said in a newspaper interview published on Sunday.

Last month, Switzerland’s finance minister said the country’s banks should be subject to a leverage ratio of between 6 and 10 percent, against the 3 percent for global banks under rules that come into force in 2018.

“On the requirement for 6-10 percent, all I can say is that this is an unrealistically high demand,” Sergio Ermotti told the Schweiz am Sonntag newspaper, noting that Swiss regulators already required more than their peers abroad.

Such a policy would lead to higher interest rates on mortgages and corporate loans, and end banks’ ability to offer favorable loans, which had benefitted the Swiss economy for the past 50 years, he said.

“Already about 25 percent of Swiss banks are earning no money and another 25 percent have such low margins that they are unlikely to survive in the long term,” he said.

Regulators should not focus exclusively on the leverage ratio, but also take into account a bank’s risk weighting and stress tests, he said, noting that there was no globally recognized definition of the leverage ratio.

“It’s time for regulators to agree quickly instead of making public statements on any single financial measure,” Ermotti said.

He also said that it was not constructive to be talking about imposing new requirements when the existing ones had not yet been put fully in place.

On Thursday the Swiss National Bank urged UBS and Credit Suisse CSGN.VX to improve their capital and leverage ratios, which it said would be a major focus in the event of a crisis.

Reporting by Tom Miles; Editing by Louise Ireland

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