Swiss Lawmakers Eye Lighter UBS Capital Rules

Swiss lawmakers are currently debating alternative capital rules for UBS, which could reduce the bank's financial obligations by billions of dollars. This potential shift comes as part of proposed legislation designed to strengthen financial safeguards following the collapse of Credit Suisse. The original government bill mandated that UBS fully cover its international subsidiaries with Common Equity Tier 1 (CET1) capital, a requirement UBS deemed "extreme" and internationally misaligned.

Sources indicate that a key discussion point involves requiring UBS to support its foreign subsidiaries with approximately 70% to 80% of CET1 capital, a notable reduction from the government's initial 100% proposal. Analysts suggest this adjustment could lower the estimated $20 billion in additional CET1 capital the bank would need to raise, potentially down to around $15 billion if an 80% standard is adopted. Some earlier discussions had even considered a 50% threshold.

The parliamentary committee overseeing the banking bill is reportedly receptive to arguments that overly stringent regulation could harm UBS's competitiveness and the broader economy. There are also considerations about incorporating less costly Additional Tier 1 capital alongside CET1, though the government views AT1 as riskier. Some shareholders have even raised concerns about UBS facing a competitive disadvantage against U.S. rivals, prompting discussions about relocating the bank's operations.