Central Banks

Expect bumpy road ahead of Brexit: UBS chairman

Close call but Brits will vote to stay in EU: Axel Weber

Banks in Europe could experience more volatility ahead of the June vote on whether Britain should leave the European Union trading block, UBS Chairman Axel Weber warned on Thursday.

"I see some further challenges over the summer," Weber told CNBC's "Worldwide Exchange." "We have a very difficult debate in Europe about Brexit with some downside risk."

Calling it a close call, Weber predicted Britons will vote to stay in the EU.

"It's very hard to prepare for a situation like that," Weber said. "So we're concerned about this short-term volatility, but medium to long term, we have quite a positive view."

Companies need "optionality," and in that sense, he said, UBS is positioned well. The bank's main operations are spread across European cities within the same time zone, but the bank also has a strong presence in London.

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On monetary policy, Weber said central banks may have overstepped boundaries with quantitative easing.

"We too much rely on central banks, and too little action comes from treasuries and structural reforms in Europe," Weber said. "In that sense, the ECB paved the way for governments not to really step up to their responsibilities."

Weber, also the former Bundesbank president and member of the European Central Bank governing council, said he's looking for more of a policy mix when it comes to central banks.

"I think negative interest rates are just a tool that you can use in close proximity to zero only," Weber said, arguing that changing liquidity provisions have led the ECB to take on another role.

"We're going to see more needs for the central banks to provide term liquidity," he said. "Banks who used to be market makers because of the new regulation have moved out of that function to a larger extent, so they don't provide stress liquidity."

The ECB is stepping up to provide liquidity instead, said Weber, pointing to the bank's 2011 long-term refinancing operation, or LTRO. But he cautioned that Greece is still an underlying threat to banks and the European Union.

"It's been off the radar screen and out of the newspaper headlines, but the problems really haven't gone away," he said.