A significant debate is unfolding in Switzerland regarding new banking rules for UBS, with lawmakers supporting a motion to defer rule-making to the government. This precedes a crucial upper house vote on Thursday, considering a recently thrashed-out compromise on draft legislation. These measures aim to strengthen Switzerland’s banking sector following the 2023 collapse of Credit Suisse, acquired by UBS.
UBS is a global financial services company offering wealth management, investment banking, asset management, and retail banking services. The proposed parliamentary compromise suggests a lower capital burden on UBS than sought by the Federal Council. The government’s overhaul plan would require UBS to hold an extra $20 billion in Common Equity Tier 1 (CET1) capital, fully backing its foreign units. UBS, however, contends this plan is excessive, disadvantaging it against international rivals.
Last month, an upper house committee passed a compromise allowing UBS to use $13 billion in Additional Tier 1 (AT1) capital for its foreign units. Federal lawmaker Andrea Caroni subsequently introduced a motion for parliament to return the banking legislation directly to the Federal Council. Caroni believes the Federal Council is the appropriate body, expressing optimism for his motion. If successful, this could empower the Federal Council to implement stricter capital requirements championed by Swiss Finance Minister Karin Keller-Sutter.
Minister Keller-Sutter argues stricter rules are vital to prevent taxpayers being “on the hook” for future bank failures. The outcome of Caroni’s motion, to be voted alongside the AT1 compromise, remains uncertain, as the FDP itself is divided. The left-leaning Social Democrats, meanwhile, have threatened a referendum if parliament “waters down” the government’s proposal for UBS to fully back its foreign subsidiaries with CET1 capital.
