Investing.com — shares rose nearly 2% on Tuesday after Reuters reported that Swiss lawmakers are considering reducing proposed capital requirements for the bank, potentially cutting billions of dollars from its expected regulatory burden.
The stock gained after Reuters reported that parliamentarians were weighing a requirement for UBS to back its foreign subsidiaries with 70% to 80% of Common Equity Tier 1 (CET1) capital, compared with the government’s proposed 100%.
Under draft legislation submitted to parliament in April, UBS would need to raise about $20 billion in additional CET1 capital if a full 100% backing requirement were adopted.
Analysts cited in the report estimated that an 80% threshold would lower that requirement to roughly $15 billion. A 50% requirement, which was also discussed at a parliamentary hearing last month, could allow UBS to maintain its current core capital levels without raising additional funds.
UBS, Switzerland’s only remaining global bank after its takeover of Credit Suisse following the lender’s 2023 collapse, has criticised the government’s proposal as excessive.
Chief executive Sergio Ermotti said last week the bank was likely to emerge from the regulatory overhaul with at least a “black eye.”
The proposed legislation is intended to prevent a repeat of the Credit Suisse collapse by tightening rules governing how UBS funds its foreign subsidiaries.
The government’s plans have weighed on UBS shares and heightened tensions between the bank and Finance Minister Karin Keller-Sutter, reflecting a broader debate over financial stability and Switzerland’s competitiveness as a banking centre.
Four people familiar with the discussions cited in the report said that lawmakers were considering requiring UBS to back foreign units with around 70% to 80% CET1 capital. The sources declined to be identified because the deliberations are confidential.
Some lawmakers are also exploring whether less costly Additional Tier 1 (AT1) capital could be used alongside CET1 to preserve UBS’s competitiveness, although the government regards AT1 instruments as carrying greater risk. Proposals under discussion envisage varying levels of AT1 capital within the overall framework.
A fee UBS would pay for access to a planned public liquidity backstop, designed as an emergency funding facility for large banks, could also be linked to the bank’s capital requirements, according to two of the sources and a third person familiar with the matter.
The upper-house committee currently reviewing the banking bill is widely viewed as sympathetic to UBS’s argument that overly burdensome regulation could undermine the bank and the wider economy.
However, tougher requirements are expected to be advocated when the legislation reaches a parliamentary vote later this year, with centrist and moderate lawmakers likely to hold the balance of power.
Two sources said a compromise requiring CET1 backing somewhere between 50% and 100% could emerge from the committee as lawmakers seek a proposal capable of securing broader parliamentary support.
