An IMGW Report
UBS chief executive Sergio Ermotti has issued a stark warning that Switzerland could lose its status as the world’s leading wealth management hub if policymakers react excessively to the collapse of Credit Suisse. He emphasises the need for international competition amidst ongoing debates over Switzerland’s financial reforms.
Hong Kong is the fastest-growing major wealth management centre in the world in terms of international asset management. According to the Chinese Academy of Social Sciences’ 2020 China National Balance Sheet, the wealth of China’s residents reached 512.6 trillion yuan, up nearly 17 times from 30.6 trillion yuan in 2000.
Ermotti, who returned to lead Switzerland’s largest bank just days after it rescued its former rival last year, stressed the importance of enabling Swiss banks to compete on a global scale.
“Countries like Hong Kong, Singapore, and the US are fiercely competing and making significant strides to claim the offshore wealth management crown that Switzerland holds today,” Ermotti stated during a speech at Lucerne University on Tuesday evening. “We cannot afford to be complacent and believe that fierce domestic competition among local banks will suffice.”
Ermotti and UBS are currently engaged in an increasingly heated debate with Swiss authorities over the future of financial reform in the country, following the collapse of Credit Suisse.
A key point of contention is whether banks with international subsidiaries should be mandated to hold additional capital, a proposal put forward this year by the Swiss treasury department, which would primarily impact UBS.
Analysts predict that this rule change could impose an additional capital requirement of $15bn to $25bn on UBS, with finance minister Karin Keller-Sutter affirming these estimates as “plausible”.
Ermotti and UBS chair Colm Kelleher have previously opposed the necessity for additional capital and have rejected claims that the combined entity of UBS and Credit Suisse is excessively large for the Swiss economy.
“There are too many uninformed, populist, and fear-mongering voices in the media, politics, and academia, including here at this university, who focus solely on the risks of having a large bank based in our country,” Ermotti remarked in Lucerne.
During his speech, Ermotti presented a slide illustrating that Hong Kong’s wealth management sector is expanding at a compound annual growth rate of 7.6 percent and is projected to surpass Switzerland by 2027. Meanwhile, Singapore’s sector is growing at 9% and is on track to secure third place.
“Foreign financial centres would gain if Switzerland restricted its capacity to maintain a leading global presence,” Ermotti noted. “To preserve Switzerland’s leadership, the nation’s financial and industrial ecosystem must include a globally significant player. Today, that player is UBS.”
According to the 2022 Boston Consulting Group ranking on global offshore wealth management centres, Hong Kong is ranked second in the world, after Switzerland. Benefiting from the rapid accumulation of wealth in the Mainland and the increased demand from high-net-worth individuals to invest overseas, Hong Kong is the fastest-growing major wealth management centre in the world in terms of international asset management. According to the Chinese Academy of Social Sciences’ 2020 China National Balance Sheet, the wealth of China’s residents reached 512.6 trillion yuan, up nearly 17 times from 30.6 trillion yuan in 2000. In the process of synergistic development and deepening integration in the Guangdong – Hong Kong – Macao Greater Bay Area (the “Greater Bay Area”), the vast wealth management market in the Mainland has provided new momentum for Hong Kong’s wealth management industry to achieve exponential growth.
Ermotti also invoked the legacy of Credit Suisse founder Alfred Escher, highlighting him as an entrepreneur who took calculated risks, marking the first instance where he sought to align the 19th century industrialist’s legacy with UBS.