ZURICH (Reuters) -UBS should have seven years to fully capitalise its foreign units, the Swiss government said on Friday, as the country opened a formal consultation on the key proposal of a broader banking regulation overhaul.
The capital requirement will be raised in increments over a seven-year period, the government said, in line with the range it set out in June when it presented a sweeping plan to strengthen financial stability after the collapse and acquisition of Credit Suisse by UBS in 2023.
UBS said it was assessing the information and restated its disagreement with the proposed capital requirements, calling them excessive and misaligned with international practice.
“The Federal Council, the Swiss National Bank (SNB) and the Swiss Financial Market Supervisory Authority (FINMA) regard this measure as essential for achieving the too big to fail objectives for improved financial stability,” the government said.
The bank, political parties and other interest groups now have until January 9 to give feedback to the government, which must finalise the bill and submit it to parliament next year.
Core capital backing should be 65% when the new rule comes into force, rising by 5 percentage points annually thereafter until the target of 100% is reached, the statement said.
UBS executives have argued the additional capital burden of $24 billion will put the Zurich-based bank at a disadvantage to rivals and undermine Switzerland’s competitiveness.
A cost-benefit analysis released by the government alongside the legal proposal concluded that stricter capital requirements are the package’s key instrument.
“They increase the crisis resilience of banks, reduce moral hazard and enable better loss absorption in the event of a crisis,” economic consultancy BSS said.
The Swiss Bankers Association said that “extreme” capital rules would make it less attractive to do international business from Switzerland.
The centre-left Social Democrats, meanwhile, said the government proposal was still insufficient.
(Reporting by Ariane Luthi, Editing by Miranda Murray and Catherine Evans)
