The Federal Council’s impending regulations on banking stability, not anticipated until late spring, have received a hopeful response from a coalition of parliamentarians from the National Council and the Council of States. This group has allegedly sent comforting signals to UBS, suggesting a potential relaxation of the forthcoming stringent capital requirements.
In casual discussions, representatives from various political parties have purportedly assured UBS executives that the proposed new regulations for Switzerland’s last globally active bank of systemic importance will be diluted. UBS was informed that attempts would be made to negotiate a middle ground on the proposals put forth by the Federal Department of Finance (FDF). It’s predicted that the Federal Council’s proposal would necessitate UBS to augment its capital by approximately 22 billion dollars.
Keller-Sutter’s Too Big to Fail Proposal
Finance Minister Karin Keller-Sutter, the head of the FDF, proposed the reform package on the “too big to fail” (TBTF) issue in response to the Credit Suisse collapse in 2023. It’s probable that the government’s decision will be publicized as soon as April, with the most contentious aspect—foreign capital requirements—expected to be a parliamentary debate topic.
The Balancing Act: Stability vs. Competitiveness
While regulators assert that the rules are vital for depositors’ protection, critics, including UBS, caution that these regulations could potentially endanger the country’s competitiveness. A group of legislators who deem these capital requirements too rigid have indicated to UBS their desire to “resolve the issue through a compromise,” according to one source.
UBS executives are reportedly becoming increasingly exasperated by what they perceive as the Federal Council’s unwillingness to negotiate. Chairman Colm Kelleher and CEO Sergio Ermotti have frequently highlighted the competitive disadvantages UBS may face compared to the United States and the United Kingdom. The bank may even consider relocating to a jurisdiction with more favorable conditions if a compromise isn’t reached.
Rejected Committee Proposal
The FDF previously dismissed a compromise proposal offered by the economic committees of both parliamentary chambers in November. Although the specifications of a new compromise have yet to be determined, the National Council’s Committee for Economic Affairs and Taxation is expected to “take over” the process from May onwards. A person involved in the discussions stated, “From that point, we will have greater decision-making power.”
UBS Remains Silent
The proposals are anticipated to be a contentious topic among legislators during the summer session, commencing in early June.
UBS did not provide a comment. However, a source close to the bank offered, “Even if assurances are made, there is no guarantee that the final outcome will be acceptable.”
Questions & Answers
What is the proposed change to UBS’s capital requirements?
The Federal Council has proposed that UBS should increase its capital by approximately 22 billion dollars.
What are the concerns of UBS regarding these changes?
UBS executives fear that the proposed regulations could undermine the country’s competitiveness, putting them at a disadvantage compared to counterparts in the United States and the United Kingdom.
What was the response of the Federal Department of Finance to the proposed compromise?
The Federal Department of Finance rejected a compromise proposal put forth by the economic committees of both parliamentary chambers.
