UBS Warns Swiss Capital Rules Could Hit Competitiveness as Crucial Vote Nears

 UBS Chief Executive Sergio Ermotti has stepped up his opposition to proposed Swiss capital rules, warning lawmakers that excessively demanding requirements could weigh on the bank’s competitiveness and affect customers and employees as well as shareholders.

 The warning comes ahead of a key vote in Switzerland’s upper house of parliament on Wednesday over how far the country should tighten capital requirements for UBS following the 2023 collapse of Credit Suisse and its emergency takeover by UBS. 

 Switzerland’s government has argued that stronger capital requirements are necessary to protect taxpayers against the fallout from another major banking failure. Its proposal would require UBS to hold an additional $20 billion in Common Equity Tier 1 (CET1) capital, principally by requiring the bank’s foreign subsidiaries to be backed entirely by CET1 capital. 

 UBS has challenged the scale of the proposal, arguing that it could place the Swiss bank at a disadvantage against international competitors.

 A parliamentary committee has proposed a compromise allowing UBS to meet half of the requirement for foreign units through Additional Tier 1 (AT1) capital, which is less costly for the bank than CET1. UBS estimates that arrangement would require it to raise about $13 billion in AT1 capital. Ermotti described that option as painful but manageable.

 The stakes rise substantially under proposals requiring 90% or 100% CET1 backing.

 Ermotti warned that such a framework could have consequences extending beyond UBS’s shareholders, arguing that the additional costs could ultimately affect the bank’s customers and employees. UBS Chairman Colm Kelleher has separately said the bank would need to consider its future in Switzerland if regulation became so restrictive that it could no longer compete effectively.

 The dispute places capital resilience, taxpayer protection and international competitiveness at the centre of Switzerland’s post-Credit Suisse regulatory overhaul.