THE Swiss government yesterday proposed stricter rules for UBS following its takeover of Credit Suisse, which could make it hold $26 billion more in core capital, confirming some of the bank’s worst fears about incoming new regulations.
The key proposal, which the bank would have six to eight years to prepare for after it became law, is that UBS must fully capitalise its foreign units, confirming what many analysts, lawmakers and executives had been expecting.
UBS shares, which have lagged European peers amid uncertainty about the new rules, jumped after the proposals were made public yesterday afternoon, rising by more than 6 per cent and on track for their best day since May 2024.
The government said its capital requirement proposal would allow UBS to reduce its holding of Additional Tier 1 (AT1) bonds by $8bn. Today, UBS must only 60pc capitalise its foreign units and can cover some of the capital with AT1 debt.
UBS executives say the additional capital burden will put the Zurich-based bank at a disadvantage to rivals and undermine the competitiveness of Switzerland as a financial centre.
Such was the shock in Switzerland over the 2023 collapse of Credit Suisse that top politicians led by Finance Minister Karin Keller-Sutter vowed to introduce more robust rules that would protect taxpayers and prevent another meltdown in future.
Keller-Sutter now holds Switzerland’s rotating one-year presidency and yesterday’s announcement will start a long period of political wrangling over the measures, which the governing federal council called “targeted and proportionate.”
“They strengthen trust in the financial centre, which, in the view of the federal council, is central to its stability and competitiveness,” the council said in a statement.
A parliamentary inquiry last year noted that since UBS bought Credit Suisse for 3bn Swiss francs ($3.65bn) in March 2023, it has had a balance sheet bigger than the Swiss economy, and urged the government to take the foreign units into account.
The federal council said it would present drafts on the proposals for consultations with stakeholders in the second half of 2025. Finance Ministry officials say laws requiring parliamentary approval will not enter force before 2028.
Separate measures known as ordinances that can be issued directly by the government could apply from the start of 2027.
A six to eight-year transition period looked appropriate for UBS to meet new rules on capitalising foreign units from when they come into force, the government said.
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