Swiss lawmakers propose transferring UBS capital decision to government

Switzerland’s upper house of parliament wants to hand the Federal Council, the country’s executive body, the power to decide how much capital UBS needs to hold. The motion... would allow the government to set banking capital regulations through ordinance rather than requiring full parliamentary approval.

The stakes are substantial. Government estimates peg the additional Common Equity Tier 1 (CET1) capital requirement at roughly $20 billion, with some analyses suggesting the figure could climb to $22 billion.

At issue is how much of a financial cushion UBS must maintain at the parent level to fully back its foreign subsidiaries. CET1 capital is the hardest, most loss-absorbing form of bank equity. Regulators want UBS to hold enough of it at home to cover its global operations, a direct response to the lessons learned when Credit Suisse collapsed in March 2023 and had to be absorbed by UBS in an emergency government-brokered takeover.

UBS has argued publicly that these requirements are extreme and could meaningfully damage its ability to compete with global peers who face less demanding rules.

Transferring that authority to the Federal Council would allow the executive branch to act through ordinance, essentially regulation by decree. Proponents argue this would make Switzerland more agile in responding to financial risks. When Credit Suisse spiraled toward insolvency in early 2023, the government had to invoke emergency powers to broker the UBS takeover over a single weekend, using a bank with a balance sheet roughly twice the size of Switzerland’s entire GDP.

Critics see the proposal as a potential accountability gap. Parliamentary oversight forces public debate and creates a paper trail of competing interests. Handing that power to a seven-member executive council could concentrate enormous authority over the country’s largest financial institution in relatively few hands.

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The motion... would allow the government to set banking capital regulations ~~through ordinance~~ administrative regulation rather than requiring full parliamentary approval.

This isn't well written.

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