ZURICH (Reuters) - UBS urged global regulators to be clearer on how they will rein in risk-taking in traditional banking business, as opposed to investment banking, saying that failure to do so could jeopardise growth.
The Swiss bank's Chairman Axel Weber and Chief Executive Sergio Ermotti highlighted the example of leverage ratios in a guest editorial in Tuesday's Wall Street Journal as policymakers from America, Europe and Asia gather this week for an annual meeting in Davos.
"This leaves questions about stimulating growth, particularly in light of calls by some for an increase in leverage ratio requirements far above the internationally agreed level of 3 percent," the two bankers wrote.
Last week, global banking regulators agreed to ease the way a new rule, meant to rein in risky balance sheets from 2018, is compiled.
The leverage ratio acts as a backstop to a lender's core risk-weighted capital requirements. A ratio of 3 percent means a bank must hold capital equivalent to 3 percent of its total loans regardless of risk.
In Switzerland, UBS and Credit Suisse should be subject to a leverage ratio of 6-10 percent, instead of 3 percent, the country's finance minister said in November.
Global banking regulators are split over whether to fix the minimum global level at 3 percent or higher.
UBS's Weber and Ermotti complained that leverage ratio rules laid out by the global Basel III accord don't distinguish between between quality of assets to underpin risk, which could force banks to lower high-quality assets to bolster leverage ratios and profitability.
"These banks would have less protection against liquidity risks, thus increasing instability — surely not the intended consequence," the two bankers wrote.
(Reporting By Katharina Bart; Editing by David Goodman)
- Financials Industry
- leverage ratio