A logo of Swiss bank UBS is visible in Zurich, Switzerland, on May 1, 2025. REUTERS/Denis Balibouse/File Photo Purchase Licensing Rights. BERN, Aug 31 (Reuters) – Swiss lawmakers announced on Monday that UBS (UBSG.S) should support its international subsidiaries with 50% in Common Equity Tier 1 (CET1) capital, which is the highest quality form of bank capital. This decision marks a setback for the government, which had aimed for full 100% CET1 backing. The economic affairs and taxation committee of the upper house of parliament recommended that UBS be permitted to utilize less costly Additional Tier 1 (AT1) capital to cover the remaining 50%, enabling full capitalisation for its overseas units. Committee President Erich Ettlin, representing the Centre Party, emphasized, ‘This is not a victory for UBS; rather, it’s a solution that benefits Switzerland.’ According to the committee’s proposal, UBS would maintain a similar CET1 capital level but be required to increase its AT1 capital holdings. Although AT1 debt is less expensive to maintain compared to CET1 capital and is designed to absorb losses in stressful conditions, regulators consider it to be less secure. To enhance the reliability of the instrument, the committee suggests introducing an additional trigger at a CET1 capital ratio of around 11%. Should UBS’s capital fall below this threshold, the bank would need to halt payouts to investors and suspend share buybacks, while also reducing bonus payments unless it manages to restore its capital base within a defined timeframe. Ettlin noted that these changes would increase the cost of AT1 capital for the bank. Lawmakers have endeavored to strike a balance between shielding taxpayers from potential banking crises and addressing the bank’s concerns that stricter capital requirements may affect its competitiveness, exploring several less burdensome compromise options. The Swiss government is seeking for UBS to hold approximately $20 billion in additional CET1 capital to enhance financial stability following its emergency acquisition of Credit Suisse in 2023. However, UBS contends that this requirement is excessive and could harm its competitiveness and the overall Swiss banking sector. The committee’s proposed banking regulations were approved with a vote of 10 to 2, with one abstention, and must now be voted on by the upper house before being reviewed by the lower house committee and chamber, where UBS may face greater scrutiny. The final decision on the capital requirements is expected to be made by the end of this year, but it might extend until 2027, according to Ettlin. Reporting by Ariane Luthi, writing by John Revill, Editing by Tomasz Janowski and Sanjeev Miglani.
