This opinion piece aims to set the record straight for certain ‘do-gooders’ who consider the assets and governance of a public limited company to be a common good. It also serves as a reminder that a bank – whether systemic or not – remains a service provider, not a government agency designed to serve citizens.
Optimising the capital of a public limited company in accordance with the law and the tax subtleties of a state, canton or municipality is an integral part of the tools used to preserve that capital. The aim is to ensure an attractive return for shareholders while providing the services defined in its strategy. Whether this displeases certain members of the pink, green or red parties does not change the economic reality: it is neither cheating nor a violation of the law or the English language. First mistake
Critics often argue that ‘profits are privatised, and losses are socialised’. This is a simplistic shortcut, especially in a country like Switzerland, where citizens have rarely been called upon to finance economic bailouts. The Confederation and the cantons have sometimes granted guarantees, but without net loss.
Take the example of UBS: during the 2008 crisis, the Confederation made more than CHF 6 billion in profits by supporting the bank. Conversely, a cantonal bank – which I will not name for legal reasons – was effectively bailed out with taxpayers’ money, as most of its capital was held by the canton. Second mistake
Every company seeks to optimise its cash flow by negotiating its purchases, mobilising the right resources at the right time, offering competitive prices, etc. You do the same thing as a consumer: when you are offered a discount, do you refuse it on principle? Come on… Third mistake
Let’s return to UBS as a systemic bank. Yes, its size relative to GDP represents a risk. But it also represents an opportunity: billions of Swiss francs in taxes paid to Switzerland, thousands of jobs, orders placed with local companies, capital available to households and businesses.
If you want to have your cake and eat it too, you’ll end up starving. In other words, we shouldn’t be surprised if, one day, UBS moves its headquarters to London, the United States or Singapore, relegating UBS Switzerland to the status of a mere branch of the group.
It is therefore urgent to find a balance between ideological posturing and economic realities. To think that UBS will remain in Switzerland simply because it was founded there is distressingly naive and shows a profound misunderstanding of the business world. Fourth mistake
Optimisation is an integral part of the management of a well-governed company. Not seeking performance, including in financial governance, is at best a lack of competence and at worst a serious dereliction of duty.
It is to be hoped that Parliament, which is now responsible for the Federal Council’s bill on systemic banks, will raise the level of the debate. The objective must be twofold: to support the key players in our economy while ensuring the stability of that same economy.
Perhaps, who knows, we will see a surge of clear-sightedness in Bern.
Enjoy reading and see you soon.