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Swiss lawmakers have rejected a plan to delay some bank capital reforms, paving the way for the government to introduce measures that could increase UBS’s capital requirements by $3bn without going through parliament.
The upper house on Monday voted against a proposal that would have delayed and bundled together measures around capital quality with the rest of a package of “too big to fail” rules set out by the government in June.
The result means that the Swiss government can now mandate the capital quality changes by executive order, while the larger part of the reform package goes through parliament as the country tries to guard against a repeat of the Credit Suisse debacle.
The government previously said that UBS might need as much as $26bn in extra capital to ensure Switzerland could withstand a crisis at its enlarged national champion, although the bank has put the figure closer to $24bn.
Analysts and investors have been betting on the proposals being diluted through trade-offs as they progress through Switzerland’s consensus-driven political system, helping lift UBS’s share price more than 20 per cent since the day before the too-big-to-fail reforms were announced.
The rally has come despite the proposals being far more stringent than those in other countries, particularly the requirement for UBS to bolster the capital of its foreign subsidiaries, which accounts for $23bn of the requirements.
The finance department said in June the overall reforms would become law at the start of 2028 “at the earliest”, while UBS would be given a transition period of “at least six to eight years” to implement the changes once the legislation comes into force.
The capital quality changes relate to how banks quantify items such as deferred tax assets, in-house software and others on their books. Although they would only increase UBS’s capital requirements by about $3bn, they are now likely to come into effect far sooner than the other reforms.
Switzerland’s wider package of reforms also envisages tighter liquidity rules and expanded powers for the financial regulator Finma, which was widely criticised for failing to prevent Credit Suisse’s downfall in 2023. Finance minister Karin Keller-Sutter has argued that rapid implementation is vital to strengthen financial stability, warning against further delays.
But UBS has lobbied intensely against the scale and speed of the changes, saying the measures go further than those required of global peers and would reduce its ability to compete internationally.
UBS executives have also been pushing the idea in private that the bank could move its headquarters outside of Switzerland if the proposals were not watered down, according to people familiar with the matter.
While some senior Swiss bankers are taking such a threat seriously, others see it as a negotiating tactic and say it is very unlikely to happen.
Many lawmakers share concerns that rushing through such a complex overhaul could have unintended consequences.
One parliamentarian with knowledge of the discussions between MPs said ahead of the vote that the outcome was “more negative for UBS” than if the reforms had been bundled together.
Another Swiss lawmaker speaking on condition of anonymity ahead of the vote said they still expected there to ultimately be compromise. “There is still a long way to go on this legislation. I do not expect every reform to be implemented,” the person said. “The point is that there is more open discussion happening about the economic consequences of the legislation.”
Even so, uncertainty continues to weigh on UBS, and investors remain wary of the long-term costs of the reforms. Most continental lenders outperformed UBS during the first five months of the year and the Swiss bank remains a laggard.
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