The 23rd “Vision Bank – Vision Financial Center Switzerland” forum, organized by “Finanz und Wirtschaft” (FuW), brought together the CEOs of three systemically important Swiss banks to discuss the evolution of banking models and the impact of various factors on the financial sector. Held at the SIX Convention Point in Zurich, the forum featured Beat Röthlisberger of Postfinance, Sergio Ermotti of UBS, and Urs Baumann of Zürcher Kantonalbank (ZKB). The discussions centered around regulatory issues, the importance of equity capital, and the specific challenges and opportunities facing their institutions.
Regulatory Challenges and Responses
Postfinance’s Struggle with Privatization and Credit Ban
Beat Röthlisberger, CEO of Postfinance since 2024, highlighted the institution’s ongoing struggle with regulatory restrictions. Despite a failed bill in the Swiss parliament in 2022, privatization remains off the table for Postfinance. Röthlisberger expressed frustration over the credit ban that prevents Postfinance from granting loans, forcing the institution to invest 25 billion Swiss francs abroad. This situation, he argued, negatively impacts the economic interests of Switzerland.
Röthlisberger also addressed the need for legislative changes to the Postal Organization Act to better serve small and medium-sized enterprises (SMEs). He indicated a willingness to forego the mortgage business to address the concerns of cantonal banks. Additionally, Postfinance’s involvement in crypto services was driven by significant customer fund outflows to crypto exchanges, amounting to 2.5 billion Swiss francs. This shift into crypto services was a direct response to customer demands, showcasing how regulatory constraints can force institutions to adapt in innovative ways.
UBS’s Perspective on Credit Suisse and Equity Capital
Sergio Ermotti, who resumed his role as CEO of UBS in 2023, provided insights into the Credit Suisse (CS) case and the importance of equity capital. Ermotti argued that Credit Suisse’s issues were not due to a lack of equity but rather stemmed from a flawed business model, ineffective management, and inactive shareholders. He emphasized that regulatory concessions were crucial in preventing Credit Suisse from ceasing operations much earlier. This narrative helps illustrate how precise managerial decisions and regulatory frameworks can significantly influence the longevity and stability of financial institutions.
Ermotti stressed the importance of the quality of equity capital over mere quantity. He argued that higher equity capital requirements would lead to shareholder dilution, increased credit costs for households and companies in Switzerland, and reduced international competitiveness. He also highlighted that shareholders are the first line of defense during bank recapitalizations and will only invest if the bank’s business model is attractive. This remark underscored the vital role of strategic planning and sustainable business models in maintaining investor confidence and ensuring long-term growth.
ZKB’s View on Equity Capital and Market Dynamics
Urs Baumann, CEO of Zürcher Kantonalbank (ZKB) since 2022, echoed the sentiment that Credit Suisse’s downfall was due to a lack of liquidity rather than capital. He questioned why Finma was the only bank to grant Credit Suisse a regulatory filter. Baumann agreed with Sergio Ermotti on the importance of equity capital quality, noting that ZKB already has a substantial portion of its balance sheet in liquid assets. This stance reaffirmed the shared viewpoint among Swiss banking leaders that liquidity, when paired with high-quality capital, forms the bedrock of financial stability.
Baumann pointed out that higher equity requirements would lead to higher costs passed on to customers and reduced lending capacity. He compared ZKB’s balance sheet to the canton’s added value, indicating responsible growth. While some smaller cantonal banks might have higher relative weightings, their potential issues wouldn’t pose systemic risks as they could be easily acquired by other banks. This perspective highlighted a pragmatic approach to risk management and underscored the scalability differences between smaller and larger financial institutions in Switzerland.
Business Models and Strategic Directions
Postfinance’s Corporate Customer Business and Basel III Rules
Röthlisberger emphasized Postfinance’s readiness to serve SMEs, contingent on legislative changes to the Postal Organization Act. He noted that removing the credit ban would significantly enhance Postfinance’s ability to support local businesses, driving economic growth within the country. He also highlighted improvements in Postfinance’s capital adequacy under the Basel III final capital adequacy rules, despite holding less equity compared to the past.
These changes are crucial for Postfinance to navigate the evolving regulatory landscape and better serve its corporate customers. Röthlisberger argued that adopting a flexible, customer-centric approach would be vital for Postfinance to maintain its competitive edge and continue innovating in response to market demands. This argument underscores the need for regulatory frameworks that support growth and innovation within the banking sector.
UBS’s Size, Balance Sheet, and Public Liquidity Backstop
Ermotti highlighted that UBS’s current balance sheet is significantly smaller compared to its cumulative balance sheet total with Credit Suisse in 2007. He emphasized that many cantonal banks have larger balance sheets relative to the economic output of their respective cantons than UBS has in Switzerland. UBS holds over CHF 200 billion in loss-absorbing capital, indicating that the risk to Swiss taxpayers is very low. This conservative capital management strategy was showcased as a model for balancing risk and growth.
Ermotti criticized the notion that banks should finance the Public Liquidity Backstop (PLB) with a premium in advance, noting that such discussions are not happening outside Switzerland. He dismissed the accuracy of a recent University of Bern study on this topic and reiterated that “Swissness” is integral to UBS’s success, adding value to Switzerland. Ermotti suggested that maintaining UBS’s identity and operational roots in Switzerland are fundamental to its global strategy and stakeholder trust.
ZKB’s Corporate Client Business and State Liquidity Guarantee
The 23rd “Vision Bank – Vision Financial Center Switzerland” forum was organized by “Finanz und Wirtschaft” (FuW) and held at the SIX Convention Point in Zurich. This notable event brought together the CEOs of three major Swiss banks to explore the evolving landscape of banking models and the various factors influencing the financial sector. Key speakers included Beat Röthlisberger from Postfinance, Sergio Ermotti from UBS, and Urs Baumann from Zürcher Kantonalbank (ZKB). They engaged in discussions that revolved around regulatory challenges, the critical role of equity capital, and the distinct obstacles and prospects each institution faces. Besides regulatory issues, they also focused on the future of banking in a rapidly changing environment, highlighting how innovation and technology play pivotal roles. This forum offered a comprehensive analysis of the current banking climate, providing valuable insights into how these leading financial entities plan to navigate ongoing and future challenges while seizing new opportunities.
