Swiss Finance Minister Opposes Softer UBS Capital Rules After Credit Suisse Crisis
Debate Over Stricter Capital Requirements for UBS
By Marleen Kaesebier
Government's Proposal for UBS Capitalization
BASEL, Switzerland, Sept 1 (Reuters) - Swiss Finance Minister Karin Keller-Sutter on Tuesday criticised a parliamentary committee's decision to soften stricter capital rules proposed by the government for UBS after the 2023 collapse of Credit Suisse.
The government wants UBS to fully capitalise its foreign units in future, and solely by using 100% Common Equity Tier 1 capital, the highest quality form of bank capital, a step which it calculates would cost the lender about $20 billion.
Parliamentary Committee's Amendments
But the committee, citing competitiveness concerns, passed an amended version of the draft legislation stipulating UBS could back the units with 50% in CET1 capital and use less expensive Additional Tier 1 capital to cover the remaining 50%.
Finance Minister's Response and Concerns
Keller-Sutter, who has pushed hard for tougher rules to be introduced in order to protect taxpayers and avert the risk of another bank unravelling, voiced disappointment at the move.
"It does not improve the situation, quite the opposite," she said, noting that experts from the Swiss National Bank and market regulator FINMA felt the committee's proposal created legal uncertainty and was impractical.
UBS and Industry Reactions
UBS meanwhile, which acquired Credit Suisse following the demise of its longtime rival, acknowledged the committee's proposal eased the burden it faced under incoming rules.
But it would still require the bank to hold about $13 billion in extra capital, which could be met by AT1, UBS said.
The committee issued its own statement saying the government proposal would unduly restrict UBS' competitiveness.
"The committee views its proposal as a compromise between the (government) proposal and the interests of the cantons, the economy and the bank most affected, UBS," it said.
Swiss Bankers Association's Position
For its part, the Swiss Bankers Association rejected imposing stricter capital requirements but welcomed the greater latitude given to AT1 instruments under the amended plan.
"In times of geopolitical and economic tension, when other financial centres are deregulating and simplifying their frameworks, Switzerland should not manoeuvre itself into isolation by going it alone," the lobby group said.
Next Steps in the Legislative Process
The committee's proposal must still be voted on by the floor of the upper house before being debated by the lower house, where UBS could face a tougher reception.
Keller-Sutter noted there had been disagreement in the committee, with some members far closer to her vision. She also said it was possible the new rules could be put to a public referendum in future.
(Reporting by Marleen KaesebierEditing by Dave Graham and Susan Fenton)
