Swiss Upper House Votes for 90% CET1 Capital Backing for UBS’s Foreign Units
Swiss Parliament Considers New Capital Rules for UBS
Upper House Decision and Implications
ZURICH, Sept 23 (Reuters) - Switzerland's upper house of parliament on Wednesday voted in favour of capital rules that would require UBS to back its foreign units with 90% Common Equity Tier 1 capital, dealing a blow to the bank, which had lobbied against it.
The capital rules bill, part of measures drawn up following the 2023 collapse of Credit Suisse, will now move to the lower house, with a final decision expected at the end of this year at the earliest, and more likely in 2027.
Market Reaction
Shares in the bank showed little reaction to the upper house decision. At 0744 GMT UBS shares were up 0.5%.
Background and Competing Proposals
Government's Original Proposal
The government had proposed making UBS back its foreign units with 100% CET1 capital, a demand that UBS said was excessive and likely to make it less competitive.
Rejected and Alternative Options
The upper house narrowly rejected the government's plan before backing the 90% CET1 capital option over a more moderate proposal agreed last month by an upper house committee to allow UBS to back foreign units with 50% CET1 capital and 50% Additional Tier 1 (AT1) capital, which is cheaper to hold.
Voting Results
There were 29 votes for the 90% CET1 proposal and 16 for the 50% AT1 option.
UBS Response and CEO Commentary
CEO Sergio Ermotti's Position
UBS CEO Sergio Ermotti said on Tuesday the 90% CET1 plan was no real compromise and urged support for the AT1 option.
Concerns Over Capital Requirements
In Monday's edition of the Neue Zuercher Zeitung newspaper Ermotti said excessive capital requirements would end up being borne not just by shareholders but also customers and employees.
"We can live with a black eye, but two black eyes and a broken nose is too much. Yet that's exactly what the demand for capital backing of 90% or 100% comes down to," he said.
(Reporting by Ariane LuthiEditing by Dave Graham)
