Swiss lawmakers are expected to reduce the government’s demand that UBS hold an additional $20 billion in Common Equity Tier 1 capital when parliament drafts new banking stability rules next month, striking a compromise between protecting taxpayers from a future bailout and keeping the country’s only remaining global bank internationally competitive.
“We certainly don’t want to put taxpayers’ money at risk for a possible bank bailout, but we also mustn’t weaken UBS unnecessarily,” said Fabio Regazzi of the Centre Party, which is expected to be decisive in building a majority. Lawmakers said the final buffer could be reduced to anywhere from $12 billion to zero after a transition period, though the matter remains contentious and no majority position has yet formed.
The parliamentary committee aims to reach a decision next month, with the bill reaching the upper house in September and final capital rules potentially passed by year end. The Swiss National Bank has warned this month that partial backing of UBS’s foreign units with CET1 capital would contravene financial prudence, since UBS’s balance sheet is larger than Switzerland’s entire economy.
UBS CEO Sergio Ermotti has repeatedly warned stricter rules could force the bank to shrink its US and Asian operations and weaken Switzerland as a global financial centre.
