UBS has no plans to move its headquarters out of Switzerland, chief executive Oswald Gruebel said yesterday in response to a flurry of reports that the bank could re-domicile under pressure from Swiss regulators.
But he did not deny reports that UBS is looking into a way of hiving off its investment bank or other parts of the bank to allay Swiss concerns about being the lead regulator to a bank with international operations too large for the country to bail out again.
The bank said in its first-quarter results statement that it is “evaluating potential changes to our booking model and corporate structure in view of developing regulatory concerns and requirements, not only in Switzerland but also in the UK, US and elsewhere”. Any structural changes will in part be aimed at mitigating the impact of Switzerland’s 19 per cent core tier one capital requirements, which are the highest any regulator has so far adopted.
Analysts at broker Credit Agricole Cheuvreux suggested that this could mean ring-fencing the investment bank and moving its headquarters to the domicile that hosts most of its business, most likely London or New York.
“Foreign regulators will increasingly demand capital to be located where the business is as they realise that only systemically important functions will be saved in the event of a crisis,” Cheuvreux analysts said in a note.
But any ring-fencing would still probably not allow a subsidiary to duck Switzerland’s capital requirements altogether, due to Swiss bankruptcy law that demands “enforced solidarity” within a group.