Swiss Senate votes for 90% CET1 capital backing for UBS

The Swiss Senate on Wednesday voted in favour of capital rules that would require UBS to back its foreign units with 90% Common Equity Tier 1 capital, dealing a blow to the bank. Keystone-SDA

The Swiss Senate has backed tough new capital rules for UBS, requiring the banking giant to finance 90% of its foreign holdings with core equity capital.

The new rules are intended to tighten the “too-big-to-fail” framework in Switzerland. The Senate reached its decision on Wednesday by 29 votes to 16. In doing so, it opted for an approach proposed by a significant minority.

In the days leading up to the decision, UBS and major trade associations had publicly opposed this motion. A 90% requirement for Common Equity Tier 1 capital was not a compromise on the Federal Council’s proposal, said UBS, adding that it would cause lasting damage to its competitiveness.

+ UBS global units must be backed by ‘hard capital’: SNB

UBS and several major business associations would have preferred the compromise drafted by the majority, which was ultimately rejected. Under this proposal, the bank would have had to underpin at least 50% of its foreign holdings with Common Equity Tier 1 capital. For the remainder up to 50%, AT1 (Additional Tier 1) bonds would have been permissible.

The Federal Council and a minority of senators had sought an even stricter requirement, calling for full underpinning of foreign holdings with hard equity capital. However, their motion was defeated on Wednesday.

The capital rules bill, part of measures drawn up following
the 2023 collapse of Credit Suisse, will now move to the lower
house of parliament, with a final decision expected at the end
of this year at the earliest, and more likely in 2027.

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Translated from French, reviewed by an English Department journalist.