The problem with nomadic megabanks

Behold an exciting new feature of the post-bailout era: the megabank that wanders the globe with the weapons of financial mass destruction strapped to its chest.

UBS (UBS), the giant Swiss bank that took $59 billion in bailout funds three years ago in addition to billions of dollars in conveniently cheap Fed loans, is chafing at the restrictions that terrified regulators there are imposing.

The government wants to avoid having its Godzilla-scale financial firms – led by UBS and Credit Suisse (CS) – from blowing up the economy in the next downturn the way the reckless Irish banks did. That's bad for re-election prospects and much else.

UBS doesn't like that sort of talk and so wants to move its investment banking unit – the outfit that brought you the Dillon Read fiasco, among others – out of the Alps. All this in the name of creating shareholder value, etc.

The question now is, who would be fool enough to take them? Are a few thousand jobs worth the risk of having to bail out yet another bunch of systemically important Maserati owners?

The risks of taking in an outfit like UBS are apparent enough in an International Monetary Fund report on Switzerland, released Thursday.

"Regulatory capital ratios of the big banks have strengthened, but the quality of the capital is low and leverage remains high," the report says. What a winning combination. Who wouldn't want a piece of that?

Meanwhile, the next financial meltdown stands to pose a particularly tough test for whoever ends up holding this bag. "Swiss banks' foreign exposure represents 58% of total bank assets, the highest among advanced economies," the IMF says. So the problems could come from all directions -- though two stand out.

The biggest exposures for the Swiss are in the United States, where banks hold claims worth more than Swiss annual economic output, and the U.K., where claims equal 40% of Swiss GDP. That is a lot of bailout checks if things go bad -- not that we have ever had a problem with reckless investment banks in this country.

And what global financial hubs are perceived as the leading contenders for the honor of hosting the headquarters of the newly mobile UBS investment bank? Why, New York and London, along with Singapore. May the most reckless jurisdiction win.