The lender warns the proposal would add huge costs and threaten the continuation of its successful business model
[ZURICH] UBS on Monday (Jan 12) rejected government proposals to strengthen regulations for the bank in the wake of the collapse of Credit Suisse, saying they would make Switzerland uncompetitive and arguing instead for less costly alternatives.
UBS acquired Credit Suisse, becoming Switzerland’s sole global bank, after its old rival unravelled in 2023. The government then pledged to design new rules that aimed to prevent a repeat of the crisis and ensure taxpayers would not be on the hook.
UBS, Europe’s largest wealth manager, said the package of tougher capital requirements – at the heart of which are proposals to make UBS fully capitalise its foreign subsidiaries – could make it hold US$24 billion in additional capital.
“The proposal would lead to huge added costs and endanger the continuation of the successful business model,” UBS said, arguing the measures put forward for foreign units were disproportionate and out of step with international competitors.
Extra costs for customers
To avoid having to cover stricter requirements for those units solely with costly Common Equity Tier one capital, UBS said it was important that so-called Additional Tier 1 (AT1) debt and bail-in bonds also be considered.
UBS said AT1 instruments should be strengthened and handled in line with practice followed in the EU and Britain. Otherwise, higher capital costs would lead to added costs for customers and tighter credit supply, it argued.
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The government launched consultations on the proposals in September, giving stakeholders until early January to respond.
UBS also said that had regulators applied existing Swiss rules properly, Credit Suisse would have had to make adjustments sooner, which would have ensured its survival.
Although the government has publicly upheld its tough line on the proposed new rules, sources familiar with the matter say a compromise should emerge.
In December, Reuters reported the government is preparing to water down some new rules over which it has direct control, while lawmakers say parliament is likely to opt for regulations more moderate than what officials initially pitched. REUTERS
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