UBS Chairman Colm Kelleher called a Swiss parliamentary committee’s proposal on capital backing for foreign subsidiaries an acceptable compromise the bank could live with. The proposal would allow half of the requirement to be met with common equity tier one capital and up to half with additional tier one instruments. It differs from the government’s plan to require full CET1 backing. The committee proposal has not become law.
UBS estimated that the compromise would require about $13 billion of additional AT1 capital and $2 billion of CET1. The bank said its total incremental Tier 1 burden since the Credit Suisse acquisition would be about $30 billion under that approach. These are UBS estimates rather than final regulatory calculations. The applicable requirements will depend on the legislative outcome.
PARLIAMENTARY DECISION REMAINS PENDING
The Swiss Council of States postponed its decision on the stricter capital rules until the following week. Swissinfo reported that no decision had been taken on 17 September. The delay means the committee compromise remains a proposal within an unfinished political process.
The debate centres on how a parent bank should capitalise foreign subsidiaries and how much loss-absorbing capacity must be held in the highest-quality form. A larger CET1 requirement would generally be more restrictive than permitting AT1 instruments for part of the backing. Parliament must still determine the final statutory direction before regulators can implement detailed rules.
CAPITAL MIX SHAPES THE BANK’S BURDEN
UBS has argued that the government’s original approach would impose a larger burden and affect its competitiveness. Kelleher’s remark indicated that the bank could live with a mixed capital structure, not that a final law had been approved. The $13 billion and $2 billion figures should therefore remain tied to the bank’s assessment of the proposal.
The next milestone is renewed consideration by the Council of States. Any parliamentary amendment would then need to move through the remaining legislative process before taking effect. Investors and regulators will focus on the final CET1 share, eligible AT1 treatment and transition timetable.