Switzerland’s upper chamber of parliament has approved a stricter capital framework for UBS, with the bank saying the change could leave it needing roughly $18bn in extra capital.
Members of parliament endorsed a measure requiring UBS to support its overseas subsidiaries with 90% Common Equity Tier 1 (CET 1) capital.
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In doing so, they dismissed the bank’s preferred approach, which would have allowed a 50-50 split between CET1 capital and Additional Tier 1 capital, the latter being less costly to maintain.
The decision comes as Swiss authorities prepare new banking safeguards in response to the failure of Credit Suisse in 2023.
Ministers had initially put forward a tougher requirement under which UBS would have had to cover its foreign businesses with 100% CET1 capital, a level the bank argued was too severe.
The legislation now passes to the lower house, with a final outcome seen as most likely in 2027.
Separately, senators voted down a government proposal that would have forced UBS to make a full deduction from the parent bank’s CET1 capital for the book value of its foreign subsidiaries.
UBS said the 90% CET1 requirement for foreign participations would mean UBS holding about $16bn more in CET1 capital.
That would come on top of about $2bn in additional CET1 capital at UBS AG tied to ordinance-level steps announced earlier this year.
If the upper house decision is upheld, UBS said it would have to carry about $33bn in extra CET1 capital in total since taking over Credit Suisse.
In a statement, the bank said: “This political outcome is not a compromise and fails to address the root causes of the Credit Suisse collapse. It disregards the serious concerns expressed by the overwhelming majority of respondents in the democratic consultation process, which included all business representatives, the relevant employee associations and most cantons. The respondents clearly dismissed the Federal Council’s extreme regulatory proposals as damaging to the Swiss economy.”
In May, UBS chief Sergio Ermotti said the bank needs a wider business base in the US while it prepares for all possible outcomes from the Swiss parliamentary debate over stricter capital requirements.
Last month, the country indicated that the bank would need to build roughly $20bn in additional buffers to help prevent a repeat of the failures that brought down Credit Suisse.
