“In its consultation response, the Swiss Bankers Association (SBA) rejects the Federal Council’s proposal to amend the Banking Act and the Capital Adequacy Ordinance with regard to the capital backing of systemically important banks’ foreign participations at parent company level,” the SBA said in a statement. “Instead, the SBA calls for proportionate, targeted regulation that is aligned with international standards. It also demands a thorough review of viable alternatives to the proposed maximalist approach as well as a holistic view of all planned measures to avoid unnecessary burdens on the financial centre and the real economy. The goal must be to strengthen system stability while also securing Switzerland’s competitiveness as a location for finance and business.”

Credit Suisse lessons
UBS said policymakers should address the lessons learned from the Credit Suisse crisis in a “consistent and targeted manner.”

“The Credit Suisse crisis was primarily the result of the bank's unsustainable strategy and insufficient profitability, inadequate risk management, an inappropriate culture, and weak governance. For too long, Credit Suisse was not forced to take corrective action because regulatory concessions tailored to Credit Suisse undermined the regulations that actually applied,” UBS said.

“This was also noted by the Parliamentary Investigation Commission (PUK), among others,” it said.

On 29 September last year, UBS said that the Federal Council’s proposed regulatory valuation of software, deferred tax assets, and regulatory valuation adjustments is “a combination of the maximum requirements of various jurisdictions and does not take into account the ultimate impact of the overall package in the respective countries”.

“The proposed requirements were also deemed excessive and not internationally aligned in the statements issued by the business community as a whole, employee associations, banks, cantons with strong financial centres, and business-oriented parties. After consulting with the industry and authorities, the Economic Affairs and Taxation Committees (WAK) of both chambers of parliament spoke out in favour of internationally aligned rules,” it said.

UBS said the Federal Council's proposal on capital requirements for foreign subsidiaries is based on the “extreme assumption” that the parent bank must be able to absorb the total loss of all of its foreign subsidiaries during ongoing operations without any negative impact on the parent bank's Common Equity Tier 1 (CET1) capital.

“The proposal extends far beyond the original objective of the Federal Council's report on banking stability dated 10 April 2024. While the report called for 100 per cent Tier 1 coverage, the new proposal calls for approximately 130 per cent Tier 1 coverage. For UBS, this would result in additional CET1 capital requirements of approximately $23 billion and thus very high costs, not only for UBS, but for the entire financial centre, households, and companies.

Recent reports (Swissinfo, Bloomberg, others) say the Federal Council's proposed capital rules look increasingly unlikely because the Swiss People's Party, the largest party in the Swiss legislature, has supported an alternative proposal.

As reported in April 2024, the Federal Council wants systemically important Swiss banks – such as UBS – to hold significantly more capital against their foreign units. UBS, Raiffeisen Group, Zürcher Kantonalbank and PostFinance are deemed systemically important lenders.