All of Switzerland in suspense: The looming catastrophe of UBS bank cannot be avoided
Switzerland anxiously watches the fate of UBS, the country’s only remaining large bank. Since last year’s rescue of Credit Suisse, the question arises: how will the authorities deal with the threat of a UBS collapse, which could have catastrophic consequences for the entire Swiss economy?
Government is working on a rescue plan.
The government will publish a plan this month to control banks in the “too big to fail” category. UBS is expected to face stricter business rules and increase capital by tens of billions of dollars.
UBS’s balance sheet stands at $1.7 trillion, double Switzerland’s annual GDP. The bank has such enormous weight, and there is no local competitor in the country to help it in case of a collapse. The cost of nationalization would also significantly affect public finances.
Analysts warn that a UBS collapse would be devastating for Switzerland.
The government is trying to find a solution that would protect the economy while maintaining the stability of the banking sector. The question is how strict the conditions for UBS will be and how the bank will manage to meet them. The situation around UBS is important not only for Switzerland but also for the global economy. A bank collapse could have a domino effect and destabilize the banking sector in other countries.
It remains to be seen how the UBS story will end.
Statistics:
- $1.7 trillion: UBS balance sheet (double Swiss GDP)
- 15%: Leverage ratio requirement for systemically important banks
- 4.7%: UBS’s current leverage ratio
- $100+ billion: UBS’s potential capital shortfall
Consequences:
- A UBS collapse would have devastating consequences for the entire Swiss economy.
- The cost of nationalization would significantly affect public finances.
- A collapse could have a domino effect and destabilize the banking sector in other countries.
Source:
- Reuters: Swiss financial watchdog calls for more powers after Credit Suisse crash: https://www.reuters.com/business/finance/swiss-financial-watchdog-calls-more-powers-after-credit-suisse-crash-2023-12-19/
- Swiss National Bank: https://www.snb.ch/
- University of St. Gallen: https://www.unisg.ch/en/
