Switzerland's regulator enforces stricter rules on UBS

Stefan Walter has taken charge of Switzerland's financial regulator, known as Finma, for a year now. He has earned the nickname “The Sheriff” for his direct approach with banks. Walter, 60, has a strong background in financial regulation, including time in the US. He aims to change the relaxed relationship between Swiss financial firms and their regulators, especially after the collapse of Credit Suisse in 2023. Walter has pushed for stricter capital requirements for UBS Group AG. This could increase UBS’s capital needs by up to $25 billion. He believes that its foreign operations should be fully supported by the parent bank's equity. UBS disagrees and feels this response is excessive. The larger concern is Switzerland's reputation as a safe financial haven, which may be at risk due to recent events. Since Walter’s appointment, Finma has imposed penalties on several banks for insufficient risk management. This includes confiscating more than $23 million from two firms for their failures. Walter has also called for increased powers for Finma, including the ability to impose large fines and to have more staff and resources. Notably, Finma has increased its oversight of Julius Baer, a global wealth manager facing scrutiny after a major client defaulted. Banks have noticed more frequent inspections and requests for documentation from regulators. Walter insists he does not aim to conflict with banks but wants a balance between financial stability and profitability. Walter’s assertive style breaks from Switzerland's traditional regulatory approach, which favored self-regulation. Some believe his tough stance is needed for better accountability. The key question now is whether this newfound assertiveness from Finma will last as the memory of the Credit Suisse crisis fades. The Swiss government’s support for tougher regulations might indicate a shift in public sentiment towards increased scrutiny of banks.