The UBS chair has warned against major increases in capital requirements, the newspaper reports

ZURICH (Reuters) – UBS Chair Colm Kelleher warned on Sunday that the Swiss government's plan to tighten capital requirements for big banks could damage the country's position as a financial center.

The government earlier this year planned tougher capital requirements for UBS and Switzerland's three other big banks to shore up the financial sector after Credit Suisse's crash last year.

In an article published in Swiss newspaper SonntagsBlick, Kelleher said he agreed with most of the 22 recommendations in the government's report, except for the proposal for stricter capital requirements.

“A really big issue I have is the increase in capital requirements. It doesn't make sense,” he said of the so-called “too-big-to-fail” report.

Details of the exact capital requirements have yet to be released, although Finance Minister Karin Keller-Sutter said in April that estimates UBS would need another $15 billion to $25 billion were “reasonable”.

In a separate estimate, analysts at Autonomous Research said UBS would need to retain an additional $10 billion to $15 billion.

Kelleher declined to comment on the figures, but said excessive capital requirements would hurt competitiveness and lead to less favorable prices on banking products for consumers.

“We should focus on more important issues such as liquidity management and, above all, the complete solvency of a bank,” Kelleher told the newspaper.

According to a 2021 Deloitte study, Swiss banks contribute to its role as the world's top financial center, with approximately $2.6 trillion in international assets under management. However, competition is increasing from Luxembourg and especially Singapore, which has grown rapidly in recent years.

UBS – which has a balance sheet twice the size of annual Swiss economic output – would pose a serious risk to the Swiss economy if it were to collapse, experts have warned.

Kelleher downplayed the dangers, saying UBS held “significantly more” capital than comparable banks, while the bank's business model – based on wealth management and the Swiss domestic market – meant it was less risky.

UBS remained committed to Switzerland even as Bern demanded an additional capital increase, said Kelleher, who remains chairman from 2022.

“Although we are a global bank, the heart of UBS is our Swissness,” he said, adding that “there is no question” the lender will leave its home country.

Still, he warned that it would be detrimental to Switzerland if the bank had to increase its capital levels.

“If politics forces us to massively raise our capital, then Switzerland has decided that it no longer wants to be a relevant international financial center,” Kelleher said.

I think it cannot be in the interest of the country.

The former Morgan Stanley executive said he is ready to talk to the government about his proposals.

(Reporting by John Revill; Additional reporting by Emma Ferg; Editing by Clelia Oziel)