UBS CEO Ermotti Warns Parliament on Excessive Capital Rules for UBS
UBS Faces Stricter Capital Requirements After Credit Suisse Takeover
ZURICH, Sept 20 (Reuters) - UBS Chief Executive Sergio Ermotti warned lawmakers against imposing excessively strict capital requirements on the Swiss bank in an interview published on Sunday, days before a key parliamentary vote.
Switzerland's upper house of parliament is due to decide on Wednesday how stringent new capital rules being drawn up for UBS after the 2023 collapse of Credit Suisse should be.
UBS subsequently acquired its stricken rival in an emergency takeover engineered by Swiss authorities.
Government Proposals for Tougher Regulation
The government says tougher regulation is needed to protect taxpayers from another crisis, and has pitched proposals it says would require UBS to hold an extra $20 billion in capital.
Ermotti's Concerns Over Capital Requirements
Ermotti told the Neue Zuercher Zeitung newspaper UBS could accept some tightening of the rules but said the government's plan to make the bank back its foreign units with 100% Common Equity Tier 1 capital is excessive.
"It's a mistake to believe the additional costs will only be borne by shareholders," Ermotti said. "Customers and employees will be affected, too."
Compromise Options and Their Impact
Last month an upper house committee agreed a compromise that would allow UBS to meet half the foreign units requirement with cheaper Additional Tier 1 capital. UBS calculates it would need to find $13 billion in AT1 capital for that option.
Ermotti said this would be painful for the bank, but doable.
Alternative Proposals and Industry Reactions
During an upper house debate on Thursday there were signs that some lawmakers are leaning towards a separate compromise that would make UBS cover its foreign units with 90% CET1 capital, which would be considerably dearer for the bank.
That option went too far, Ermotti said.
"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.
Potential Consequences for UBS and Swiss Banking
His remarks came after UBS Chairman Colm Kelleher said the bank would need to consider its future in Switzerland carefully if the new rules ended up so strict that it cannot compete.
Regulatory Responsibility in Credit Suisse Collapse
Ermotti also said Swiss financial regulator FINMA and the Swiss National Bank bore some responsibility for Credit Suisse's demise. Neither immediately responded to requests for comment.
(Reporting by Oliver HirtEditing by Dave Graham and Nick Zieminski)
