UBS CEO pushes back on Swiss capital rules ahead of parliamentary vote

UBS chief executive Sergio Ermotti recently cautioned lawmakers against enacting overly stringent capital requirements for the Swiss bank, days before a crucial parliamentary vote. The Swiss upper house of parliament is set to determine the level of new capital rules for UBS following the 2023 Credit Suisse collapse, which UBS acquired through an emergency takeover.

The government insists on tougher regulation to shield taxpayers from future crises, proposing that UBS hold an extra US$20 billion in capital. Ermotti acknowledged that UBS could tolerate some tightening of the rules but argued that the government's plan to require the bank to fund foreign units with 100% Common Equity Tier 1 capital is excessive.

He stated, "It's a mistake to believe the additional costs will only be borne by shareholders." Customers and employees will also be affected, according to Ermotti. Last month, an upper house committee reached a compromise allowing UBS to meet half the foreign units requirement with cheaper Additional Tier 1 capital, which UBS estimates would require US$13 billion.

Some lawmakers may lean towards a separate compromise that would demand UBS cover its foreign units with 90% CET1 capital. UBS chairman Colm Kelleher expressed concerns about the bank's future in Switzerland if the new rules become so stringent that UBS cannot compete. Ermotti also attributed some responsibility for Credit Suisse's collapse to the Swiss financial regulator FINMA and the Swiss National Bank.