UBS Group said it would need to hold $13 billion in additional top-tier capital, below previous estimates, under a proposal from the Swiss upper legislature to overhaul the country's banking regulations.
The economy committee of the Council of States, the upper chamber of the Swiss parliament, said in a statement Tuesday that it recommended allowing UBS, the country's biggest bank, to cover up to half of additional capital requirements included in the new regulatory regime through so-called AT1 bonds, rather than only through CET1 capital.
The Swiss government had previously proposed a bill that required UBS to fully deduct the book value of its foreign subsidiaries from the CET1 capital of its parent bank. In April, UBS estimated the full deduction of investments in foreign subsidiaries would require it to hold $20 billion in additional CET1 capital--a measure of a bank's capital strength.
That would "too tightly limit UBS's competitiveness, and in doing so also harm the economy," the committee said, setting out its proposals to ease the government's planned stricter rules on capital backing for Swiss banks' foreign units.
UBS said in response that it acknowledged the committee's efforts to consider alternatives to the government's proposal, which the bank calls "extreme."
The amendments proposed by the upper house's lawmakers would still "represent a substantial tightening of Swiss capital requirements, which are already among the most stringent in the world," UBS said.
Still, the upper house's approach is "materially softer" than the government's original proposals, Jefferies analyst Joseph Dickerson told clients in a note. "Capital backing for foreign subsidiaries continues to fade as a controversy, in our view," he said.
The Federal Council--Switzerland's executive-- had already this year watered down its proposals to overhaul banking regulation in the Alpine nation. The measures are aimed at preventing a repeat of the problems that sank Credit Suisse earlier this decade. UBS in 2023 integrated its smaller rival at the behest of the Swiss government.
"UBS supports targeted adjustments to Swiss banking regulation that are internationally aligned, proportionate and address the root causes of the Credit Suisse crisis," the bank said.
