Criticism of Swiss Government's Capital Requirements for UBS

By John Revill and Oliver Hirt
ZURICH (Reuters) – The Swiss Bankers Association criticized government plans for tougher capital requirements on UBS after the 2023 Credit Suisse collapse, arguing this could harm the competitiveness of Switzerland's financial sector.

In April, the Swiss government outlined plans for stricter capital requirements for UBS and the country’s three other major banks to enhance the robustness of the financial system. However, the SBA contends that the current capital requirements for systemically important banks, including UBS, are already sufficient.

The SBA endorsed targeted measures to bolster financial stability but emphasized the need for fundamental principles and proportionality in any changes. They expressed, "We are very critical of some of the measures as a whole and in total. Firstly, the measures on equity capital must be assessed in their entirety and must not needlessly restrict competitiveness."

The government proposals encompass the strengthening of capital requirements for banks' foreign subsidiaries. While the SBA acknowledged this could provide more flexibility during crises, they cautioned that it might disadvantage banks and called for careful calibration of such effects.

The specific additional capital requirements for UBS remain uncertain, but the government suggested they could fall between $15 billion and $25 billion. UBS, represented by Chairman Colm Kelleher, has opposed higher capital requirements, claiming they could jeopardize Switzerland’s status as a financial hub.

The Swiss government aims to implement these measures swiftly, with plans to present two packages by mid-2025. The SBA is actively participating in consultations regarding these proposals.

In its evaluation, the SBA also indicated that suggestions to expand the Swiss financial regulator FINMA’s powers, such as imposing fines and early intervention in banks, require thorough scrutiny.