Switzerland’s banking sector is poised for potential changes in its rules to prevent bank runs, with discussions focusing on measures that could include limits on withdrawals and the imposition of fees for account exits. Sergio Ermotti, Chief Executive Officer of UBS Group, recently addressed this issue, shedding light on the anticipated timeline and its potential impact on the Swiss banking landscape.
Ermotti expressed confidence that Switzerland would uphold its high banking standards and not be at a disadvantage compared to other global jurisdictions. During the presentation of UBS’s third-quarter results, he reassured analysts by stating, “I don’t see us being particularly disadvantaged compared to any other jurisdictions in terms of liquidity ordinance.”
However, Ermotti acknowledged that the process of implementing new banking rules to prevent bank runs would take time. He anticipated that it would be “months and months before the full analysis of what happened will translate into concrete actions.” He also acknowledged the challenges of tracking various ideas and proposals reported in the media.
Ermotti dismissed speculation regarding specific measures such as limiting withdrawals and imposing exit fees, suggesting that these might not be part of the eventual regulatory package. He noted that the too-big-to-fail review, scheduled to be presented in the spring, was still in the early stages, and even the Swiss finance minister had not taken an official stance on the matter.
The notion of staggering a greater portion of withdrawals over an extended period, as reported by Reuters, was mentioned as one option under consideration. However, Finance Minister Karin Keller-Sutter clarified that this specific measure was not currently on the table as part of Switzerland’s review of financial regulations.
UBS’s Chief Financial Officer, Todd Tuckner, also weighed in on the issue, explaining how the bank was addressing the challenge of making deposits more stable and less prone to sudden withdrawals. He highlighted that clients were increasingly transitioning into fixed-term preferred deposits, which tend to be more “sticky” over the term. Tuckner emphasized that client relationships with the bank were typically built over many years and were designed to last for an extended period.
The potential changes in Switzerland’s banking rules reflect a broader concern about financial stability and the prevention of bank runs, which can have destabilizing effects on the banking sector and the broader economy. The Swiss government and financial authorities are carefully considering various measures to bolster the resilience of the banking system and protect depositors’ interests.
Sergio Ermotti’s remarks underscore the importance of maintaining Switzerland’s reputation for sound and secure banking practices. The country has long been known for its financial stability, and any modifications to banking regulations are likely to be executed with great care and prudence to ensure the continued health of the Swiss banking industry. As discussions progress and concrete actions emerge in the coming months, Switzerland will aim to strike a balance between safeguarding its financial system and maintaining its status as a global banking hub.