GENEVA (AP) — A day after UBS AG announced it was cutting up to 10,000 jobs by 2015, UBS chairman Axel Weber is warning that many of the Swiss banking giant’s rivals may have to follow suit.
The Zurich-based bank is seeking to put scandals and losses behind it with a plan to downsize its investment banking unit 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 saying in Wednesday’s edition of the German daily Handelsblatt.
“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.”
Governments, through the international banking agreement known as Basel III and the European Union, are pushing banks to increase their capital or financial reserves that can absorb losses.
That is intended to make banks less likely to fail and dump large bailout costs on taxpayers and the wider economy. But it requires banks to find those extra reserves somewhere, or to make less risky investments, or both.
The aim is to prevent another shock to the global financial system like the 2008 Lehman Brothers collapse, and to protect taxpayers from being called to the rescue. The Basel III rules 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.
Some countries — such as Switzerland, Britain and the United States — have set their own rules that are even stricter.
Deutsche Bank’s new management team, co-CEOs Juergen Fitschen and Anshu Jain, have also announced plans to cut costs, tighten pay practices and cut jobs to deal with a changed environment that includes higher capital requirements and public skepticism about banker compensation and practices. In July, the bank said it would cut 1,900 employees, most of them in investment banking, as a cost-saving measure. It is also looking to cut expenses on redundant computer systems and sell some of its real estate.
Deutsche Bank is shedding risky loans and investments by putting €135 billion of them in a non-core operations unit that will manage and sell them. A third should be gone by March of next year, the bank said.
Last month, UBS’s crosstown rival Credit Suisse Group unveiled an extra 1 billion Swiss francs in cost-cutting — with an undisclosed number of further job losses — as it posted a 63 percent fall in third-quarter profits following an accounting charge on its debt. Switzerland’s second-biggest bank had previously announced 3 billion francs in cuts that include shedding 7 percent of its workforce, or about 3,500 employees.
“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.”
Associated Press writers Geir Moulson in Berlin and David McHugh in Frankfurt contributed to this report.
More Related Stories
- Bridge collapse: Part of "aging infrastructure"
- Mistrial in penalty phase of Arias case
- Amanda Bynes arrested after hurling bong from window
- Interstate 5 bridge collapses north of Seattle
- Mississippi could begin prosecuting women for miscarriages
- Teenage girl claims she was beaten up for looking like Taylor Swift
- UK Military: London attack victim was a "model soldier"
- Billionaire hedge funder: Babies, breast-feeding "kill" focus, keep women from succeeding
- "Bookless library" set to open in Texas
- 2 more arrested in London attacks
- Glenn Beck: CNN interview with atheist tornado survivor was a setup!
- Incoming BBC news director on journalism gender gap: "We can do better"
- Illegal construction, shoddy materials at fault in Bangladesh factory disaster
- Ahead of Obama's speech, U.S. acknowledges four American drone killings
- Must-see morning clip: Bill O'Reilly visits "The Daily Show"
- Lawsuit alleges anti-gay hiring practices at ExxonMobil
- Boy Scouts poised to vote, still greatly divided on gay youth
- House supporters of KXL received $56m from fossil fuel industry
- 80-year-old becomes oldest to climb Mount Everest
- Before FBI shooting man implicated self, Tsarnaev in triple murder
- Paul McCartney backs Pussy Riot
Featured Slide Shows
The week in 10 picsclose X
- 1 of 11
Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
Credit: AP/LM Otero
Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center in Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
Credit: AP/Matt Rourke
A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
Credit: AP/Jenny Aicher
Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
Credit: AP/Molly Riley
Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
Credit: AP/J. Scott Applewhite
Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
Credit: AP/Carolyn Kaster
O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
Credit: AP/Las Vegas Review-Journal/Jeff Scheid
Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
Credit: AP/NASA/Chris Hadfield
When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
Credit: AP/Jacquelyn Martin
A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
Credit: AP/The Duluth News-Tribune/Clint Austin
Recent Slide Shows
- 1 of 11