UBS CEO Ermotti Sees a Lot of 'Over Capacity' in US Banking

Well, first of all, I have to say that the article was meant to address, recognizing that maybe short term protectionism may sound good. It creates a lot of collateral damages. And particularly when you go beyond goods and services, you look at how capital can move across different jurisdictions in a way that can create value and can help address many of the topics that are affecting our economies and our societies. Then you start to see really the cost. So in a sense, that's the first issue. So capital is somewhat affected by this protectionism moves. But when you add on regulatory potential arbitrage and that may or may not be a consequence of protectionism or another form of protectionism, then you easily go into the debate of how to protect your financial markets, your local players. And then, the issue of allowing or not allowing mergers between banks not only in Europe but across the globe becomes an issue. It's amazing.

Well, first of all, when you look at even in the U.S., you have a lot of overcapacity. If I remember correctly, around 5000 banks. When you look at Europe, the market is very fragmented. See you. There is scope for creating economies of scale diversification and the ability to diversification, then to deploy more resources to clients. The cost of that. At the end of the day, the cost is paid by the economy, by clients. I think, of course, shareholders are suffering, but eventually cost of borrowing and the facility and the easiness of accessing credit is impaired. So allowing capital to freely move across jurisdictions creates less cost for the economy.

No, I don't worry, because if you look at the Credit Suisse situation was a very idiosyncratic topic that developed over the years. The business model was not sustainable. They didn't really have a great governance and they benefited for too long from a regulatory concession that should not have been granted, or at least not for so long. And that was a quite unique situation. If you look at what happened back in March 2023, banks, large banks were actually safe haven, were part of the solution in a sense, in the U.S. but also with UBS in Europe. So big banks were solid and it showed that well-designed regulators can avoid a repeat of the financial crisis. But if you go too far, then you create costs not only for shareholders again, also for clients when it is going to cost more to borrow, it is going to slow down investments. And, so that's not the ideal situation. There's a saying and it's not mine, so you can't blame me or credit me, but the United States innovates and Europe regulates and that seems to be the way and the path of travel. And it's the reason why a lot of people expect the U.S. to grow really significantly and less so in Europe.