UBS Opposes Swiss Banking Rules, Advocates for Cost-Effective Solutions

UBS's Stance on Proposed Banking Regulations

By Ariane Luthi and Dave Graham

Impact on Competitiveness

ZURICH, Jan 12 (Reuters) - UBS has rejected government proposals to strengthen banking rules in the wake of the collapse of Credit Suisse, saying on Monday they would make Switzerland uncompetitive and calling instead for less costly alternatives.

Concerns Over Capital Costs

Banking and business lobby groups echoed the view, while the right-wing Swiss People's Party said it favoured a compromise to ensure UBS was competitive internationally and the centre-left Social Democrats and Green Party backed the proposals.

Role of AT1 Instruments

UBS became Switzerland's sole global bank after its former rival Credit Suisse imploded in 2023. The Swiss government then pledged to design new rules that aimed to prevent a repeat of the crisis and ensure taxpayers would not be on the hook.

Potential Customer Impact

Europe's largest wealth manager said the package of tougher capital requirements - at the heart of which are proposals to make it fully capitalise its foreign subsidiaries - could make it hold $24 billion in additional capital. 

"The proposal would lead to huge added costs and endanger the continuation of the successful business model," UBS said, arguing the measures put forward for foreign units were disproportionate and out of step with international competitors.

The government launched consultations on the proposals in September and gave stakeholders until early January to respond.

Business association Economiesuisse said higher capital costs would negatively impact Swiss industry.

EXTRA COSTS FOR CUSTOMERS 

To avoid having to cover stricter requirements with costly Common Equity Tier 1 capital, UBS said it was important that Additional Tier 1 (AT1) debt and bail-in bonds be considered.

UBS said AT1 instruments should be strengthened and handled in line with practice followed in the European Union and Britain. Otherwise, higher capital costs would lead to added costs for customers and tighter credit supply, it added.

Had regulators applied existing Swiss rules properly, Credit Suisse would have had to make adjustments sooner, which would have ensured its survival, UBS said in a statement.

The Swiss Banking Association echoed this, saying the Credit Suisse crisis was not caused by capital requirements being too lax, but by too much regulatory latitude.

"Simply avoiding such concessions in future would be entirely sufficient," the group said.

Although the government has publicly upheld its tough line, sources familiar with the matter say a compromise should emerge.

Reuters reported in December that the government is preparing to water down some new rules over which it has direct control, while lawmakers say parliament is likely to opt for regulations more moderate than what officials initially pitched.

UBS shares have jumped more than 20% since the start of December, driven in part by optimism that the capital rules would be watered down.

(Reporting by Dave Graham and Ariane Luthi; Additional reporting by Tommy Reggiori Wilkes; Editing by David Holmes and Alexander Smith)