Axel Weber gave a lecture in the CFS Colloquium series - Center for ...

Axel Weber gave a lecture in the CFS Colloquium series
Following an invitation from the Center for Financial Studies (CFS), Axel Weber, Chairman of the
Board of Directors of the UBS AG, gave a lecture about “Opportunities and challenges for the global
financial sector in a new regulatory environment: A Swiss perspective” on 13 February 2013. Jan
Pieter Krahnen, Director of the CFS, welcomed the former President of the Deutsche Bundesbank to
his speech, which was part of the CFS Colloquium series “Mission completed? Consequences of
regulatory change on the financial industry“ and attracted a large audience.
Weber started by giving an outline of the macroeconomic development within the Eurozone and
comparing it to the worldwide trends. In his view, the economic prospects were generally positive for
this year: ”We have made it through the worst.” However, he said, the economy was only recovering
slowly. Many structural problems were still not solved. EU politics was obliged to find the right
solutions.
According to Weber, central banks had exceeded the limits of their mandate when intervening during
the current crisis. They had to be brought back under political control. As substantial reforms could
not be expected before the Bundestag elections in September, pressure on central banks would be
further increasing. However, central banks could not live up to these expectations. They could only
buy more time, specific reforms had to be implemented by politicians.
In Weber’s view, the US and Asia would grow stronger compared to Europe in the next years, so
consequently the financial sector had to prepare for that. Therefore, the USB had already been
investing more in these markets.
Subsequently, Weber said some words about the development of single countries within the
Eurozone. In his opinion, Greece would stay a member of the Eurozone even if the government
lagged behind with the implementation of reforms, and debt dynamics were still not on a sustainable
way. In contrast, Ireland was positively developing although there were still budgetary and debt
challenges. Weber was also concerned about the development of Spain. The country had to
implement further austerity measures for sustainable public finances. Weber assumed that Spain
would apply for financial support from the EU in the course of the year. The prospects for Portugal
were better, even if the country still had to go a long way to get back into a good position. In
contrast, Italy remained a key weakness of the Eurozone. One reason was the upcoming election,
which Weber said would be an obstacle in the way to consolidation. Finally, Weber warned that
France was negatively developing which could lead to a downgrading of the country by rating
agencies.
Afterwards, Weber described the effects of a new regulatory environment on financial markets in
general and on the UBS in particular. The UBS reacted to the new conditions on the financial markets
with strategic changes. It would be going to cut back parts of its investment banking, focus more on
customer orientation and offer less complex and risky products. One reason for these decisions lay in
the increasing risk aversion of customers. Weber regretted that long-term planning for banks was
very complicated because of the uncertainties about the future regulatory environment. It was

important to regulate financial markets globally in order to create a level playing field for banks that
operate worldwide.
Weber criticized plans for a separation of investment and commercial banks. There was no empirical
evidence that universal banks were part of the problem in the financial sector. On the contrary,
specialized banks, like Lehman Brothers, had failed.
Weber called for coordinating the introduction of regulatory measures with the economic
development. In this respect, it was a good decision to introduce Basel III step by step until 2019. The
UBS was an early mover as regards the implementation of the new regulatory framework. It had
early adjusted to the new capital requirements. Now, politics had to work on standardizing the level
playing field for all banks. Otherwise, adjusting quickly could result to be a disadvantage for the UBS.
After the lecture, Weber was asked about the greatest threat for a sustainable financial architecture
in Europe. In his opinion, this was the loose monetary policy at present. It risked increasing inflation,
which would cause particular problems for the poorer population. Weber also feared that bubbles
could arise on financial markets because of the loose monetary policy which could cause a new crisis.
The crisis, he said, was like a chameleon: it always changes its appearance.