UBS Weighs In on Proposed Swiss Capital Requirements

UBS remains at the centre of capital rules deliberations before Switzerland’s Council of States. The debate is set to resume next week.

The rules trace back to lessons drawn from Credit Suisse’s 2023 collapse. In practice, they currently affect only UBS.

The Federal Council wants banks considered too big to fail to fully back their foreign subsidiaries with hard core capital, known as CET1. That would be a rise from the current 45 percent.

UBS has challenged the plan. It estimates the change would require roughly US$22 billion in additional CET1 capital.

The majority of the Council’s Committee for Economic Affairs and Taxation (WAK-S) has proposed an alternative.

Foreign units would need 50 percent CET1 backing. The rest would be covered by AT1 bonds, high-yield instruments that convert into equity or are written off if a bank runs into serious difficulty.

UBS has raised similar objections to this option.

A substantial minority, led by Peter Hegglin, wants a 90 percent CET1 requirement, closer to the government’s original plan.

The group points to lessons from the Credit Suisse crisis, arguing a higher requirement would signal a safe, trustworthy financial centre.

A separate minority, led by Eva Herzog, backs the Federal Council’s full proposal. A third minority would leave the matter to a government ordinance.

Tiana Angelina Moser called the committee’s compromise “a tightening with a sense of proportion”.

She added that the financial centre needs to become more resilient, while a large bank must stay internationally competitive.

Finance minister Karin Keller-Sutter raised concerns over the committee’s proposals. She called on parliament to weigh its responsibility as the debate continues.

Featured image: Edited by Fintech News Switzerland, based on image by Magnific.

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