UBS CEO calls for stricter banking regulations following Credit Suisse’s fall

ZURICH – UBS CEO Sergio Ermotti, speaking at the University of Zurich, called for a more stringent regulatory framework and penalties for banker misconduct in the wake of Credit Suisse’s collapse. Highlighting the findings of an expert panel, Ermotti emphasized the need to bolster the Swiss Financial Market Supervisory Authority’s (Finma) ability to intervene early in a banking crisis.

Ermotti’s comments come after a tumultuous period earlier this year, marked by a significant drop in Credit Suisse’s share value and a subsequent exodus of client assets, which prompted UBS to step in as a savior. He criticized Credit Suisse’s chronic mismanagement and failure to heed persistent warnings amid ongoing scandals that ultimately led to its downfall.

Earlier, at the Swiss Risk Association event, Ermotti assured stakeholders of UBS’s robust safety measures and low taxpayer risk in financial downturns. He advocated for potential acquisitions by private international entities rather than relying on state aid in such scenarios. His statements underscored the bank’s commitment to high safety standards and substantial protective measures before any resolution action might be necessary.

Additionally, Ermotti proposed updates to liquidity policies reflecting the digital banking era and suggested adopting UK-style senior management accountability measures. These recommendations are aimed at enhancing regulatory tools for preemptive supervision and ensuring the stability of the financial system.

The UBS CEO’s push for stronger oversight indicates a shift towards greater accountability within the banking sector, particularly in light of recent events that have tested the resilience of Switzerland’s financial institutions.

InvestingPro Insights

As UBS CEO Sergio Ermotti stresses the importance of regulatory oversight and financial stability, the latest data from InvestingPro highlights UBS Group AG’s (SIX:) position in the market. With a market capitalization of $84.48 billion and a notably low price-to-earnings (P/E) ratio of 7.98 based on the last twelve months as of Q3 2023, UBS stands out as a significant player in the Capital Markets industry. This low earnings multiple suggests that the stock may be undervalued relative to its earnings, which is a point of interest for investors.

InvestingPro Tips indicate that UBS has high earnings quality, with free cash flow exceeding net income, and that stockholders have been enjoying high returns on book equity. These factors are particularly relevant as Ermotti discusses UBS’s safety measures and financial health. Despite weak gross profit margins, the bank has managed to maintain dividend payments for 12 consecutive years, with a current dividend yield of 2.15%. Additionally, UBS’s share price has experienced a large uptick over the last six months, showing a 27.93% total return, which could reflect investor confidence in the bank’s stability and future profitability.

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