UBS Attacks Swiss Central Bank for ‘Misleading’ Stability Report
(Bloomberg) — UBS Group AG has criticized the Swiss National Bank for a “misleading” regulatory report on the lender’s readiness for stricter capital rules.
The latest clash follows a SNB statement earlier Thursday that indicated UBS already holds sufficient capital to comply with the Swiss government’s proposed “too-big-to-fail” financial reforms.
UBS strongly contested that assessment, arguing the central bank’s presentation distorts the true operational impact of the pending regulations. The dispute underscores mounting friction between the country’s largest financial institution and its primary regulators over post-crisis stabilization measures.
“Today’s report by the SNB continues to reiterate misleading statements, including an incomplete analysis of the root causes of the collapse of Credit Suisse, the role of AT1 and the impact of Basel 3 capital rules, rather than offering the distinct independent analysis needed for a fact-based policy debate that is critical to the future resilience of Switzerland’s financial center,” UBS said in an emailed statement.
In its annual financial stability review published Thursday, the Swiss central bank said that it continues to support the government in demanding a full capital backing of the bank’s foreign units. Given that UBS has reserves of $9 billion at its Swiss unit, it already has sufficient capital to meet this, the SNB said.
The government wants to force UBS to raise the amount of common equity capital it holds domestically against its foreign operations to 100% of each unit’s equity value, from 60% at present. UBS estimates that this would require it to add about $20 billion in CET1 capital to its Swiss entity, severely damaging its business model, and by extension hurt the domestic economy.
“We note that the sizable and unwarranted cumulative capital impact of the proposed measures would be a significant competitive disadvantage both domestically and internationally – as recognized by truly independent observers, including a leading credit rating agency,” UBS added in its statement.
The lender has previously disputed government’s numbers and considered options including the relocation of its headquarters. In late April, Switzerland watered down part of the reforms but refused to back down on its core demands.
The core package is now being debated in parliament and the process is expected to last until next year. Lawmakers look set to reduce the government’s proposals, but there’s also broad agreement that capital requirements should rise from their current levels. The committee responsible will meet again in August and could then formally propose easing.
The SNB, along with financial regulator Finma, have consistently supported the idea of full capital backing. The International Monetary Fund has also endorsed the approach.
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