UBS AG said on Tuesday it opposes a compromise proposal from Switzerland's Senate committee on bank capital rules, warning the plan would impose significant additional costs on the lender. The recommendations from the Senate's Economic Affairs and Taxation Committee (WAK-S) would require the bank to raise roughly $13 billion in additional Tier-1 capital, which could be covered by Additional Tier-1 (AT1) instruments.
This comes on top of $2 billion in additional Common Equity Tier-1 (CET1) capital already required under federal rule changes announced by the government. UBS also noted it must hold an additional $15 billion in CET1 capital under existing post-Credit Suisse takeover requirements, bringing total Tier-1 capital additions linked to the acquisition to about $30 billion.
The bank highlighted a potential offset: changes to consolidated group-level rules announced earlier this year could reduce CET1 capital requirements by $4 billion. The WAK-S proposal would require UBS's foreign subsidiaries to be backed by 50% CET1 and 50% AT1 capital, whereas the federal government had previously proposed full CET1 backing. UBS previously estimated the federal plan would require roughly $20 billion in additional CET1 capital. Current requirements stand at 45% CET1 and 15% AT1.
In a LinkedIn post, UBS Chief Executive Sergio Ermotti acknowledged the committee's efforts to explore alternatives to the government's more stringent proposals. He also welcomed the committee's plan to align Swiss AT1 instruments more closely with international practices, which could enhance their loss-absorption capacity in early crisis phases. Ermotti and Chairman Colm Kelleher have communicated the same stance to employees.
The bank emphasized that the proposed measures, alongside other regulatory steps, would increase financing costs for Switzerland's financial sector and broader economy. This comes as major financial centers globally simplify and tighten their banking regulatory frameworks, potentially putting Swiss institutions at a competitive disadvantage.
