If the Swiss regulators are pushing for UBS to relocate its high-risk division, they're guilty of wishful thinking
It is "pure speculation", says UBS, that its Swiss regulators are pushing the bank to move its investment banking unit out of the country.
Nevertheless, the speculation is intriguing. Switzerland has imposed upon its banks a capital and liquidity regime that is more severe than anything implemented (or to be implemented) in the US, the UK or the rest of the Europe. It has good reason to do so. The balance sheets of UBS and Credit Suisse are alpine in size. Switzerland couldn't cope with a major collapse – the last banking crisis was painful enough for Swiss taxpayers, thanks in large part to UBS's investment bank.
It is also logical for the Swiss to wish to go further than mere capital and liquidity improvements. Big banks attract and manage big risks. In a full-blown crisis, nobody really knows how much capital is enough to keep banks away from taxpayers.
But the Swiss authorities, if the report is accurate, are guilty of wishful thinking. It is inconceivable that the UK would want to take responsibility for UBS's most risky operation on a no-strings basis. We've got enough UK banks with huge balance sheets, thanks. Singapore is so small that a move there would be pointless – state support could not be relied upon in a crisis. That leaves the US on the supposed shortlist. But, again, what's in it for the US?
Sorry, but UBS, including its investment bank, is Swiss.