Swiss proposal mandates UBS to boost capital by $26bn
The Swiss government has proposed new capital norms, requiring UBS to increase its core capital by $26bn following its acquisition of Credit Suisse.
This move aims to enhance financial stability and prevent future banking crises.
The proposed regulations would mandate UBS to fully capitalise its foreign subsidiaries, reported Reuters.
UBS has been given a timeframe of six to eight years to comply once the legislation is enacted.
However, UBS has expressed strong opposition to the capital requirement, labelling it "extreme" and misaligned with international standards.
The government indicated that the new capital requirements would allow UBS to reduce its Additional Tier 1 (AT1) bond holdings by $8bn.
Currently, UBS is only required to capitalise 60% of its foreign units, with the option to use AT1 debt to meet some of its capital needs.
UBS executives have raised concerns that the additional capital requirements could hinder the bank's competitiveness and impact Switzerland's status as a financial hub.
The proposal follows the collapse of Credit Suisse in 2023, which prompted Swiss officials, including Finance Minister Karin Keller-Sutter, to advocate for stricter regulations to safeguard taxpayers and the economy.
Keller-Sutter, who currently holds Switzerland's rotating presidency, stated that the measures are essential for the stability of the financial sector.
The federal council plans to present draft proposals for stakeholder consultations in the latter half of 2025, with parliamentary approval required before the laws can take effect in 2028.
However, separate ordinances could be implemented as early as 2027.
UBS's Common Equity Tier 1 (CET1) capital ratio may need to rise from 14.3% to as high as 17%, surpassing that of major global competitors.
UBS has indicated that it disagrees with the proposed capital increase, which it claims would necessitate holding approximately $24bn in additional CET1 capital.
The Swiss government has also proposed reforms to strengthen the market regulator FINMA and improve banks' access to liquidity from the Swiss National Bank.
Last month, UBS Group agreed to pay $511m to settle a US investigation into its subsidiary, Credit Suisse Group, for facilitating tax evasion among wealthy Americans.
"Swiss proposal mandates UBS to boost capital by $26bn" was originally created and published by Private Banker International, a GlobalData owned brand.
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