UBS AG cuts jobs. More banks to follow?

UBS AG announced it was cutting up to 10,000 jobs by 2015, part of a plan to downsize investment banking and drop risky trading activities. UBS AG chairman Axel Weber warned that many of the Swiss banking giant's global rivals may have to follow suit. 

Alessandro Della Bella/AP/File
In this 2008 file photo, dark clouds hang above the logo of the UBS in Zurich, Switzerland. Swiss banking giant UBS AG announced massive layoffs, saying it aims to trim as many as 10,000 employees by 2015.

A day after UBS AG announced it was cutting up to 10,000 jobs by 2015, the Swiss banking giant's chairman Axel Weber warned Wednesday that many of its global rivals may have to follow suit.

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

Its third-quarter net loss of 2.17 billion Swiss francs ($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 telling the German daily Handelsblatt on Wednesday.

"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."

Many banks have been preparing for the so-called Basel III rules, which will be phased in from early 2013 and take full effect in 2019. They were developed by a committee of the Bank for International Settlements, based in Basel, Switzerland, a unique institution that coordinates policy and provides banking for all the world's central banks.

The Basel Committee on Banking Supervision's prescriptive rules for the biggest banks — the ones deemed "too big to fail" — require them to hold between 1 and 2.5 percent more and better-quality capital cushions. By 2019, they recommended that these banks have a capital buffer equivalent to 7 per cent of risk-weighted assets.

The aim is to prevent another shock to the global financial system like the one in 2008, when Lehman Brothers collapsed, and to protect taxpayers from being called to the rescue.

But some countries such as Switzerland, Britain and the United States have gone beyond that. By 2019, for example, Swiss banks — under what is known in banking circles as "the Swiss finish" — will have to set aside capital that includes at least 10 percent common equity. Up to 9 percent can be contingent convertible bonds.

"Yes, there is regulatory pressure," Weber was quoted as saying. "But the market environment has changed as well. Banks that see the current recovery of the markets as a lasting development are wrong. ... The market environment will remain difficult."

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.