UBS criticises Swiss proposal to change capital adequacy requirements

UBS criticises proposal to amend the Capital Adequacy Ordinance Keystone-SDA

The major bank UBS has criticised a draft amendment to the Federal Capital Adequacy Ordinance in Switzerland.

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According to UBS, the “disproportionate” proposals for the treatment of the bank’s own software and deferred tax assets would destroy around $11 billion (CHF8.7 billion) in capital at the Group level. The ordinance requires banks and securities firms to hold sufficient capital to cover risks associated with their business operations

Overall, UBS lacks an in-depth impact assessment of the regulation, according to the consultation response published on Tuesday. In addition, the costs for capital estimated in separate studies are “not in line with reality”. In contrast to the “theoretically derived” costs of 3.2%, the company’s own studies arrive at capital costs of around 10%.

UBS also considers the Swiss government’s proposal to strengthen the AT1 capital (Additional Tier 1) held for crisis situations to be untargeted. The bank criticises the fact that the proposal does not provide for any transitional arrangements for the proposed “far-reaching changes”.

UBS supports the strengthening of financial stability in principle, provided that the implementation is “targeted, proportionate and internationally coordinated”, the bank emphasises in the consultation response. However, it is against “extreme capital measures” that are neither proportionate nor internationally coordinated.

With the consultation response, UBS is commenting on the consultation opened at the beginning of June on the amendment to the Capital Adequacy Ordinance. The ordinance does not cover the higher capital backing for UBS’s foreign subsidiaries that the Swiss government is seeking. This is to be regulated separately in a law.

Adapted from German by DeepL/jdp

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