UBS chief suggests other banks may need to downsize too

The Zurich-based bank is seeking to put scandals and losses behind it with a plan to downsize its investment banking unit and drop risky trading activities.
By JOHN HEILPRIN Published: November 1, 2012
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— A day after UBS AG announced it was cutting up to 10,000 jobs by 2015, UBS chairman Axel Weber is warning that many of the Swiss banking giant's rivals may have to follow suit.

The Zurich-based bank is seeking to put scandals and losses behind it with a plan to downsize its investment banking unit and drop risky trading activities.

Its third-quarter net loss of $2.31 billion was largely due to its investment banking unit, where new rules for increasing capital reserves reduce the amount of money for investing.

“I suspect that many banks have not yet really understood what the consequences of the new capital rules for business will be when they come into full effect in 2019,” Weber was quoted as saying in Wednesday's edition of the German daily Handelsblatt.

“We, on the other hand, see this new world very clearly,” he said. “Besides that, Swiss rules commit us to even higher own capital demands than the 10 percent capital quota that Basel III orders.”

Governments, through the international banking agreement known as Basel III and the European Union, are pushing banks to increase their capital or financial reserves that can absorb losses.

That is intended to make banks less likely to fail and dump large bailouts costs on taxpayers and the wider economy. But it requires banks to find those extra reserves somewhere, or to make less risky investments, or both.

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