00:00Trading the Alps for Uncle Sam. UBS Chairman Colin Kelleher has held private talks with Treasury Secretary Scott Besson about moving the bank's headquarters to America.
00:11That's according to the Financial Times. The Trump administration is said to be receptive as Switzerland pushes ahead with tougher capital rules that could cost UBS $26 billion in a way.
00:22It wouldn't really cost them that, but we're going to explain. A relocation would let the world's biggest wealth manager tap looser U.S. regulations and deepen its ambitions to buy a U.S. wealth firm.
00:34Danny, how on earth did these private talks become part of the news? Was it leaked, perhaps?
00:40It just might have been. And I think the FT might be behind that. And I wonder why it would be leaked.
00:45Let's get more on the story. Bloomberg Chief Wall Street Correspondent Sridhar Nadarajan joins us now.
00:50I mean, Shree, is this anything other than UBS sending a big old signal to Swiss regulators?
00:55Look, that is the cynical perspective here. That is the thing that we should look at. And that's probably true. It is a pressure campaign.
01:01But the drumbeat of the relocation threat has been growing louder through the course of the year.
01:06This is not the first that we've heard of it. This is the first that we've heard of a senior U.S. government official named in such a conversation, the Treasury Secretary Scott Besson.
01:14But over the course of the last year, we've been talking about this because UBS has been very clear that if Switzerland goes ahead with these new capital requirements,
01:23they will have to hold an extra $26 billion in capital.
01:27And that, they believe, will certainly make them uncompetitive internationally.
01:32Their capital requirements will go from anywhere from somewhere in the 14 percent region to 20 percent region.
01:37And they believe that is too punitive.
01:40I mean, come on. The top income tax rate in Switzerland is 15 percent.
01:46Those bankers are going to give that up for, what, 35 percent here?
01:50Sounds like it's never going to happen.
01:52Look, I think it's fair to say it's highly unlikely because you can't even ignore the significance of such a move.
01:58UBS is the Union Bank of Switzerland.
02:01It goes back to 1862.
02:03It's synonymous with the expansion, the industrial expansion of Switzerland over the last century and a half.
02:08And what modern-day Switzerland today is has been financed with banks like UBS and Credit Suisse.
02:14And UBS and Credit Suisse today are one bank, UBS.
02:17So if such a move were to happen, it would be dramatic.
02:21It would have a big impact on Switzerland because, don't forget, the crown jewel of Switzerland is either tourism economy and their banking system.
02:28So if you have their last remaining global bank leave the country, that will certainly dent their reputation.
02:34So if you were to handicap this, I would still take the under than the over on UBS moving out of Switzerland.
02:39But you can't ignore the threat at this moment.
02:41I would say, to your point, if it's like the last big bank, isn't this, to some degree, a problem of Switzerland's own making?
02:47The fact that it initiated this forced marriage between Credit Suisse and UBS means that UBS has so much more punching power than perhaps it would have in the past.
02:56Yes, but you also have to remember why Switzerland had to step in in the first place.
03:00A government does not desire to orchestrate a merger like the UBS and CS merger that we saw in 2023.
03:06Credit Suisse was in real trouble.
03:08And remember, back in 2008, the Swiss government did inject some six billion francs in the UBS balance sheet to help UBS through the global financial crisis.
03:17So the government will say, when times have gotten dire, we've had to get involved.
03:22And that is why it makes sense for us to actually make the system more sound, make the capital requirements a little more harsh for the bank,
03:29so that we don't have to come to a situation like this every 10 to 15 years.
Be the first to comment