UBS capital rules have Swiss stuck between a rock and a hard place
UBS•Swiss lawmakers are weighing capital rules for UBS, with the upper house proposing 90% Common Equity Tier 1 backing for its foreign units, up from 60%, while the government proposed 100%. The lower house committee begins debate on October 26, and a decision is not expected before December.
1. Lawmakers weigh proposals
A Swiss lower house committee will begin debating banking rules on October 26, after the upper house passed a 90% Common Equity Tier 1 (CET1) requirement for UBS' foreign units. The current requirement is a 60% buffer that can be partly met with cheaper capital; the government proposed 100% CET1.
2. Compromise remains uncertain
UBS has called the 90% proposal excessive and says it would damage the bank's competitiveness, while repeatedly saying it wants to remain in Switzerland. Some lawmakers are working on compromises, including a proposal for 75% CET1 from Liberal Party lawmaker Hans-Peter Portmann, but prospects for softer rules are considered slim.
3. Referendum risk
Lawmakers face the possibility of a referendum if rules are softened too much, while stricter requirements could prompt UBS to look elsewhere. The Social Democrats will decide whether to seek a referendum after parliament chooses its approach, which is not expected before December at the earliest.
