ZURICH, Sept 23 (Reuters) - Switzerland's upper house of parliament voted on Wednesday in favor of stricter capital regulations for UBS, which the bank estimates could require an additional $18 billion in capital. The new rules mandate that UBS back its foreign units with 90% Common Equity Tier 1 (CET1) capital, rejecting UBS's proposal to use a combination of 50% CET1 capital and 50% Additional Tier 1 (AT1) capital, which is less expensive to maintain.
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UBS responded to the decision, stating, "This political outcome is not a compromise and fails to address the root causes of the Credit Suisse collapse." The bank emphasized its commitment to safeguarding its long-term interests as the legislative process continues.
Following the 2023 collapse of Credit Suisse, the Swiss government is revising banking regulations to prevent future crises and had initially mandated 100% CET1 capital for UBS's foreign units, a demand UBS deemed excessive.
Finance Minister Karin Keller-Sutter highlighted the importance of hard equity, stating that Switzerland cannot afford a potential collapse of UBS, whose balance sheet surpasses the Swiss economy. "That’s why we need to set the necessary guidelines," she remarked before the vote.
The proposed bill will advance to the lower house, with a final decision expected in 2027. Following the vote, UBS shares rose slightly, outperforming the broader European banking index.
Maurizio Porfiri, chief investment officer of Maverix Securities, commented on the decision, saying it is burdensome for UBS but not an unexpected negative surprise. UBS CEO Sergio Ermotti described the 90% requirement as distorting UBS's competitive position and argued against its acceptance. Meanwhile, UBS Chairman Colm Kelleher warned last week that overly harsh capital requirements could lead the bank to reconsider its Swiss operations.
The left-leaning Social Democrats have indicated they may initiate a referendum campaign if parliament softens the capital regulations for UBS. The voting results were 29 in favor of the 90% CET1 proposal and 16 for the 50% AT1 option supported by Ermotti. The Swiss Bankers Association expressed disappointment in the ruling, noting that it failed to consider critical feedback from the business community.