UBS complains that tough regulations could make it less competitive
Keystone / Alessandro Della Valle
The wrangling over UBS bank has led to a decision in the Swiss Senate. Parliamentarians voted in favour of fairly tough capital requirements.
What did the Swiss Senate decide today?
UBS must be significantly better capitalised than it is at present. UBS is to underpin its foreign subsidiaries with 90% hard capital. This decision came about after months of wrangling. Twenty nine Senators voted in favour of this proposal, with 16 against.
What does this mean?
For UBS, this represents a doubling of its capital buffer. A 45% core capital ratio currently applies to its foreign subsidiaries. It has various options for raising the additional capital. For example, it could issue additional shares, retain profits or downsize its subsidiaries.
Who wins with this outcome?
Finance minister Karin Keller-Sutter is likely to be largely satisfied even though the government’s stricter proposal did not get through. But neither did the significantly weaker alternative proposal recommended by the Economic Affairs Committee of the Senate.
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Before the vote, Keller-Sutter told the Senate: “We should not repeat the mistakes that were made in the wake of the 2008 financial crisis.”
She had already described her own 100% capital ratio proposal as a compromise. However, she also asked that Senators support the 90% proposal “if necessary”.
What does UBS have to say about this?
For the bank, the decision is a defeat. In a statementExternal link, the bank said: “This political outcome is not a compromise and does not address the root causes of the Credit Suisse collapse.”
The statement also notes that the bank would have to hold around $15 billion in additional hard capital should the proposal be implemented.
Bank CEO Sergio Ermotti had personally been campaigning against the government’s proposal for months. Most recently, on Tuesday – at the same Swiss Finance Forum as Keller-Sutter – he said that current regulations were strong enough.
He also appealed to people’s emotions: “We are not just a risk to Switzerland. It is disrespectful to talk about us in this way.”
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Does the bank now have a financial problem?
No, it could manage the capital build-up. It made a profit of $7.8 billion last year, and a further $5.8 billion in the first half of 2026. If it were to retain profits and not pay out dividends, the build-up would be completed relatively quickly.
The bank’s concerns relate much more to its competitiveness. It is afraid of falling out of favour with its shareholders.
What happens next?
Following the Senate, the House of Representatives will decide on the bill. This will happen in December at the earliest. There could also be a referendum. It could take anywhere from a few months to several years before UBS is required to comply with the new rules.
The Senate debated three options: 100% backing of UBS foreign subsidiaries with core capital, 90% backing, or a 50/50 option.
In the third case, half of the capital would have been covered by AT1 bonds. These can be converted into equity capital or even written off in a crisis, above defined limits, to stabilise the bank.
Translated from German, sub-edited by Matthew Allen/ac
