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."