As the upper house of the Swiss Parliament convenes on Wednesday to vote on new capital rules drawn up for UBS following the 2023 collapse of Credit Suisse, the financial biggie’s CEO Sergio Ermotti has said that a proposal to make the bank back its foreign units with 90% Common Equity Tier 1 capital instead of 100% CET1 is not really a compromise, as he urged the Guy Parmelin government to pursue a more moderate course.
“The current proposal from the Federal Council at 100% and the 90% is de facto the same,” Ermotti said, while speaking at a Bank of America event, characterising both options as a distortion of UBS’s competitive position.
“We don’t think that this is an acceptable outcome,” he added further.
Ermotti has been aggressively supporting a compromise proposal agreed in August by a parliamentary committee that would allow UBS to back foreign subsidiaries with 50% CET1 capital and 50% Additional Tier 1 capital, which is cheaper to hold.
“We believe it’s a balanced way, which is costly for the bank, but still a balanced way to address the topic. It’s the way to go,” he noted.
Ermotti’s statements come amid the Swiss business groups stepping up their lobbying efforts against the tougher capital rules for UBS, writing to lawmakers opposing what they say risks being “excessive” regulation drawn up for the bank.
Economiesuisse, the top business lobby, along with bodies for SMEs, manufacturers, multinationals, and pharma companies, has said the Parmalin government’s proposals would massively disadvantage UBS against international rivals by ramping up capital costs.
“Such excessive regulatory requirements would not only affect the banks themselves,” the signatories wrote to upper house lawmakers in a letter dated September 18 seen by Reuters.
“In the long term, they would also be reflected in higher financing costs and a reduced supply of credit and capital market services for industry for our SMEs,” they added.
The Parmalin administration, while stating that stricter regulations are needed to strengthen banks and protect taxpayers from the risk of another Credit Suisse-like banking meltdown, has made the mention of its calculations, as per which, the entire package of measures would result in UBS holding another USD 20 billion in capital.
Lawmakers have two proposals on the table: The government’s demand mandates UBS to back its foreign units with 100% Common Equity Tier 1 capital, a proposal for 90% CET1 backing, and a softer compromise for backing of 50% CET1 and 50% cheaper Additional Tier 1 bonds.