UBS warns stricter Swiss capital rules could raise costs and weaken competitiveness

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UBS warns on Swiss capital rules

Highlights

UBS faces a potential $20 billion capital increase under stricter Swiss rules proposed after Credit Suisse's 2023 collapse and emergency takeover.
An upper house compromise would let UBS use $13 billion in Additional Tier 1 capital to meet half of the foreign unit requirement, which Ermotti calls manageable but painful.
Further proposals for a 90% CET1 capital requirement on foreign units remain costly, with UBS leadership warning excessively strict rules could threaten the bank’s competitiveness and Swiss presence.

Parliament vote sharpens focus on capital plans

As reported by Reuters, UBS Chief Executive Sergio Ermotti says the bank can accept some tightening of Swiss capital rules but argues the government's proposal goes too far ahead of a Wednesday vote in the upper house of parliament.

The Swiss government says tougher regulation is needed to protect taxpayers from another crisis after Credit Suisse collapsed in 2023 and was taken over by UBS in an emergency deal arranged by the authorities. Under the plan put forward by the government, UBS would need to hold an extra $20 billion in capital.

Ermotti tells Neue Zuercher Zeitung that requiring UBS to back its foreign units with 100% Common Equity Tier 1 capital is excessive. He says the added burden would not fall only on shareholders, but also on customers and employees.

Last month, an upper house committee backed a compromise that would allow UBS to meet half of the foreign unit requirement with cheaper Additional Tier 1 capital. UBS calculates that option would require it to raise $13 billion in AT1 capital, which Ermotti says is painful but manageable.

Pressure grows over Switzerland banking stance

During an upper house debate on Thursday, some lawmakers appear to support a separate compromise that would require UBS to cover its foreign units with 90% CET1 capital, a level Ermotti says would still be significantly more expensive for the bank.

Ermotti says that option also goes too far, warning that overly strict requirements risk damaging the bank's position. His remarks follow comments from UBS Chairman Colm Kelleher, who says the bank would need to consider its future in Switzerland carefully if the final rules leave it unable to compete.

Ermotti also says Swiss financial regulator FINMA and the Swiss National Bank bear some responsibility for the demise of Credit Suisse. Neither institution immediately responds to requests for comment.

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