Swiss parliamentary committee passes UBS capital concessions

Swiss lawmakers on Monday said UBS should back its foreign subsidiaries with 50% in Common Equity Tier 1 capital, a setback for the government, which has sought 100% CET1 backing.

The economic affairs and taxation committee of the upper house of parliament, looking into banking regulations in the wake of the Credit Suisse collapse, said UBS should be allowed to use cheaper Additional Tier 1 capital to make up the other 50% to achieve full capitalisation of its units abroad.

Lawmakers have tried to balance protecting taxpayers from a future banking crisis against the bank's concerns that tougher capital requirements could undermine its competitiveness, considering several less costly compromise proposals.

The Swiss government wants UBS to hold about $20 billion in additional Common Equity Tier 1 capital to bolster financial stability after its emergency takeover of Credit Suisse in 2023.

But UBS has argued the requirement is excessive, would undermine its competitiveness and damage Switzerland's banking sector.

"This is not a victory for UBS, it's a solution that serves Switzerland," said Committee President Erich Ettlin, a lawmaker with the Centre Party.

The proposals for new banking regulations, which were passed by the committee by 10 votes to two, with one abstention, now have to be voted on in the upper house before being examined by the lower house committee and chamber, where UBS could face a tougher reception.

At the earliest the final decision on the capital requirements could be reached at the end of this year, but it would be more likely in 2027, Ettlin said.