A study by the University of Bern revealed that Swiss bank UBS is significantly benefiting from a state guarantee, resulting in savings of billions. The study, released on Tuesday, has sparked discussions on banking regulations in the context of the 2023 collapse of Credit Suisse and its aftermath, a former rival.
The University of Bern scrutinized Swiss proposals for establishing a public liquidity backstop (PLB) to safeguard systemically important banks during crises. It pointed out that UBS, being deemed "too big to fail," essentially enjoys a state guarantee, leading to a reduction of the bank's funding expenses by at least $2.9 billion in 2022.
When questioned by Reuters regarding the findings, UBS referred to previous statements by CEO Sergio Ermotti, who contested the existence of such a guarantee. Ermotti maintained in 2024 that UBS could absorb losses up to $200 billion without taxpayer intervention.
According to the 32-page study, a government liquidity support guarantee, similar to other too-big-to-fail (TBTF) measures, essentially subsidizes non-convertible bond financing for systemically important banks (SIBs). This setup encourages a debt-heavy funding structure that, in conjunction with limited liability, distorts the motivations of shareholders and management.
In April, Swiss Finance Minister Karin Keller-Sutter expressed her belief that UBS benefits from an implicit state guarantee. The government proposed in 2023 that a fee ranging from 70 million to 210 million Swiss francs ($77 million to $232 million) would have been suitable for its five SIBs in 2022 to finance the PLB.
The merger of UBS and Credit Suisse was facilitated with Swiss authorities' support, resulting in a financial institution with assets exceeding Switzerland's economy. This move prompted calls for stricter regulations on the conjoined entity.