New Swiss bank laws may hinder UBS's challenge against Wall Street giants.

• The Swiss government has published a 209-page plan containing 22 measures to enhance its regulation of "too big to fail" banks, one year after Credit Suisse was rescued through an emergency deal with UBS.
• The Swiss banking sector and economy are under increased scrutiny due to the UBS balance sheet, which has doubled Switzerland's annual GDP.

Porta Advisors partner Beat Wittmann believes that Switzerland's new banking regulations create a "lose-lose situation" for banks and may limit their potential to compete with Wall Street giants.

The Swiss government has published a 209-page plan containing 22 measures to enhance its regulation of "too big to fail" banks, one year after Credit Suisse was rescued through an emergency deal with UBS.

Since the Global Financial Crisis, the largest merger of two systemically important banks occurred due to government backing.

The UBS balance sheet, at $1.7 trillion, is now twice the size of Switzerland's annual GDP, leading to increased scrutiny of the Swiss banking sector and broader economy following the Credit Suisse collapse.

Wittmann stated on CNBC's "Squawk Box Europe" that the fall of Credit Suisse was a predictable failure due to the actions of government policy, central bank, regulators, and the finance minister.

Credit Suisse's failed, unsustainable business model and incompetent leadership were evident in its ever-falling share price and credit spreads throughout 2022, which were ignored due to a lack of institutionalized know-how at the policymaker levels, which is crucial in the banking sector.

The Swiss Financial Market Supervisory Authority was given additional powers in the Wednesday report, including the ability to apply capital surcharges and strengthen the financial position of subsidiaries. However, the report did not recommend a "blanket increase" in capital requirements.

Wittman stated that the report fails to alleviate concerns about politicians and regulators' ability to oversee banks while maintaining their global competitiveness, resulting in a lose-lose situation for Switzerland as a financial center and UBS's inability to fully realize its potential.

To capitalize on its newfound scale and challenge the likes of , , and , which have similarly sized balance sheets but trade at s much higher valuation, he suggested prioritizing regulatory reform over tightening the screws on the country's largest banks.

Wittmann stated that the regulatory level playing field is crucial, and it involves competences, incentives, and the regulatory framework, including capital requirements, which is a global-level exercise.

"It doesn't make sense that Switzerland or any other jurisdiction imposes very different rules and levels, which hinders competition."

To optimize its potential, Wittmann suggested that Switzerland's regulatory regime should align with those in Frankfurt, London, and New York. However, the Wednesday report revealed a lack of willingness to implement any significant reforms that would benefit the Swiss economy and taxpayers while also allowing UBS to compete globally and achieve U.S. valuations.

"The policymakers in Switzerland had a track record of three global systemically relevant banks, but now we have only one left, and this was due to insufficient regulation and enforcement of the regulation," he stated.

"Despite having the legal framework and tools to handle the situation, FINMA failed to act, resulting in fines, which seems shortsighted to me."