UBS Capital Bill Vote Postponed to Sept. 23 by Swiss Upper House
(Bloomberg) — The upper house of Switzerland’s parliament postponed a vote over UBS Group AG’s capital requirements after lawmakers exceeded the time allotted for the debate.
A vote on the matter has been set for Sept. 23 following remarks from Finance Minister Karin Keller-Sutter. The chamber went ahead with the debate on Thursday after a lawmaker who’d proposed handing the decision back to the government withdrew the motion.
The draft law, which could entail as much as $20 billion in fresh capital requirements for Switzerland’s biggest bank, will now continue its path through both houses as initially planned. Keeping the debate in parliament means there’s a higher chance that the final law will differ from what the government wants.
The key thrust of the Federal Council’s reforms is that UBS should back the full value of its foreign subsidiaries with the highest-quality capital, CET1, at home. UBS has called those proposals “extreme” and argued that they would make it uncompetitive.
UBS has gained some support for its position in parliament, and lawmakers in the upper house’s influential Economic Affairs and Taxation Committee have sought to broker a compromise. A new effort emerged late last month that would allow UBS to use a type of hybrid debt known as AT1 bonds to meet half of the new capital requirements. This would substantially reduce the need for UBS to find fresh equity capital as a result of the new rules.
That effort, however, is less likely to find support among left-of-center lawmakers.
AT1 bonds “can’t absorb losses” during the stabilization phase of a bank, said Social Democrat lawmaker Eva Herzog, one of the critics of the committee compromise. “That’s smoke and mirrors. Only CET1 can absorb losses.”
Lawmakers must now decide whether they back the government’s proposal, the one endorsed by the committee, or one of the other options on the table.
The result of the Sept. 23 vote will be passed to the lower house, likely later this year, for further debate. A final ruling on UBS’s capital requirements isn’t likely until next year at the earliest.
The debate over UBS’s regulation has weighed on the bank’s share price over the past two years and caused uncertainty over investor payouts. The bank has even considered moving its headquarters out of the country in response to what it sees as over-regulation, people familiar with the matter have said previously.
Lawmakers are seeking to balance preventing a future financial crisis from overwhelming the resources of the state, with preserving the competitiveness of Switzerland’s financial center.
“We don’t want UBS to leave the country, and also not that it’s taken over by foreigners,” said centrist lawmaker Pirmin Bischof.
–With assistance from Isabel Demetz and Myriam Balezou.
(Updates with decision to postpone vote from first paragraph.)
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