UBS says Swiss capital plan 'disproportionate', would weaken bank and economy

By John Revill

ZURICH (Reuters) -UBS on Tuesday said government plans for Switzerland's biggest bank to hold more capital were "disproportionate" and "out of touch with reality", as it stepped up its campaign against the proposals.

The measures, drafted to make the Swiss financial sector more secure in the wake of the 2023 Credit Suisse crisis and due to be implemented as soon as next year, would weaken the bank, financial industry and the country's economy, UBS warned.

The lender said it supported the Swiss government's aims of learning lessons from the Credit Suisse crisis, which led to UBS's takeover of the stricken bank, and strengthening the Swiss regulatory framework.

"However, the currently proposed capital measures do not meet these criteria," UBS said in its response to a government consultation on the measures.

"The proposed measures... go far beyond international standards," it added.

$42 BILLION OF ADDITIONAL CAPITAL NEEDED

The broadside came as UBS and the government manoeuvre ahead of the introduction of the proposals, although both sides have also privately signalled a willingness to compromise.

As a result of the Credit Suisse takeover initiated by the authorities and the proposed adjustments, UBS would have to hold around $42 billion of additional capital, the bank said.

This would give UBS a Common Equity Tier 1 capital requirement of 19%, a figure that was 50% higher than its European and U.S. competitors, the bank said.

As a result, UBS would be at a "significant disadvantage in an international comparison, weaken the Swiss economy and the financial centre, and take insufficient account of the lessons learned from the Credit Suisse crisis", the bank said.

UBS DISPUTES TREATMENT OF SOFTWARE, DEFERRED TAX ASSETS

The measures, which can be introduced without going through parliament, could make UBS hold around $11 billion more in core capital. Switzerland says more capital is needed so UBS can better absorb losses and stabilise itself in a crisis without taxpayer support.

Bern also wants to improve the quality of UBS's core capital by excluding items such as software and deferred tax assets. UBS said it was against that exclusion, saying it destroyed capital without justification.

The government will examine the comments from the bank, industry bodies and political parties before deciding on how to proceed.

(Reporting by John Revill; Editing by Kirsti Knolle, Miranda Murray and Jan Harvey)