The capital rules for UBS, a topic that has divided people across Switzerland’s banking and policy circles, will see another major development, with the European country’s lawmakers likely making a decision soon on sending a watered-down draft version of the bill to the parliament’s upper house.
The Swiss government wants UBS to hold about USD 20 billion in additional Common Equity Tier 1 capital to bolster financial stability after its emergency takeover of fallen rival Credit Suisse in 2023. UBS, however, has dubbed the requirement excessive.
Through the capital rules, lawmakers are trying to balance the need to protect taxpayers from a future banking crisis with UBS’ concerns that tougher capital requirements could undermine its competitiveness.
As per the reports, several less costly compromise proposals may find their places in the watered-down version of the bill.
The Swiss parliament’s upper house is leaning towards allowing UBS to back its foreign subsidiaries with 50% CET1 capital, rather than the 100% demanded by the Guy Parmelin government.
Other proposals would require 75% and 80% CET1 backing.
“UBS will likely be allowed to use cheaper Additional Tier 1 (AT1) capital to make up any gap in the full capitalisation of its foreign subsidiaries,” Reuters reported.
The committee is also deliberating on measures to make AT1 debt more secure.
Meanwhile, as per Giorgio Pradelli, the incoming head of the country’s banking lobby, Switzerland risks undermining its position as a global financial center by imposing excessive regulation on its banks.
Pradelli, the CEO of Zurich-based private bank EFG International, will take over as Chair of the Swiss Bankers Association in September while remaining in his current role.
“We cannot take it for granted that Switzerland will always be prominent if we do not apply the right policies, including the regulatory framework,” he told the Financial Times (FT).
The statement holds massive significance amid the ongoing debate over the capital rules.
The draft banking bill is due to be debated by the upper house in September before moving to the lower house committee and chamber, where UBS could face a tougher reception.
Final capital rules will not become clear until the end of 2026 at the earliest. There are chances about the process extending into 2027.