Stricter Capital Rules For UBS Miss The Real Issue

The political response to the Credit Suisse collapse is increasingly focused on tightening capital requirements for systemically important banks. The objective is clear: to prevent a similar crisis in the future. However, a narrow focus on higher capital buffers alone risks missing the core issue.

Trust, Not Capital, Is the Decisive Factor

The Credit Suisse collapse was not primarily the result of insufficient capitalisation. Rather, it stemmed from years of strategic missteps, weak risk management and a profound loss of trust among clients and markets. Even adequate regulatory capital ratios proved insufficient once confidence eroded and deposits began to flow out. Banks rarely fail because of a lack of capital. They fail because of a loss of trust.

Regulation in a Global Competitive Environment

Any tightening of Swiss banking regulation must be assessed in an international context. Financial centres such as the United States, the United Kingdom and Singapore pursue regulatory frameworks that balance stability with competitiveness. Overregulation in Switzerland risks driving capital, business activity and talent to other jurisdictions. This is a critical consideration for a globally oriented financial centre.

Stability Versus Competitiveness

The current debate reflects a classic trade-off. While policymakers, represented by Karin Keller-Sutter, aim to maximise stability and protect taxpayers, industry leaders, including Sergio Ermotti, caution against undermining Switzerland’s international competitiveness. Both perspectives are valid, but they require a balanced and targeted regulatory response.

The Real Blind Spot: Incentives and Governance

The key lessons from the Credit Suisse collapse lie not in the quantity of capital, but in the quality of governance. Misaligned incentive structures, unclear accountability and deficiencies in risk culture played a central role in the crisis. As long as short-term, bonus-driven performance outweighs sustainable risk management, regulatory reforms will remain incomplete.

What Matters Now

An effective evolution of the too-big-to-fail framework should therefore go beyond capital requirements and focus on:

• Strengthening corporate governance and clear accountability
• Enhancing supervisory effectiveness and enforcement
• Revising compensation structures to eliminate harmful incentives

The Perspective of Lindemann Law

For financial institutions, asset managers and investors, it is essential to assess regulatory developments holistically. Changes to the Swiss TBTF regime will directly impact business models, capital strategies and international competitiveness.

Companies should proactively evaluate how potential regulatory adjustments may affect their governance, capital structure and strategic positioning.

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