Swiss business groups lobby lawmakers to soften UBS capital rules

Swiss business associations have stepped up their campaign against stricter capital requirements for UBS, writing to upper house lawmakers to argue that the government's proposals risk imposing excessive regulation on the bank.

The letter, dated September 18 and signed by the heads of leading business lobby economiesuisse along with organisations representing small and medium-sized enterprises, manufacturers, multinationals and pharmaceutical companies, contends that the planned measures would put UBS at a significant disadvantage against international competitors by driving up its capital costs.

The signatories warned that such requirements would not be confined to the banks themselves. Over time, they argued, the burden would feed through into higher financing costs and a reduced supply of credit and capital market services for industry and SMEs.

The lobbying push comes as the upper house prepares to vote on the reform package on Wednesday. Lawmakers are weighing three options: the government's demand that UBS back its foreign units with 100% Common Equity Tier 1 capital, a proposal for 90% CET1 backing, and a softer compromise split evenly between 50% CET1 and 50% cheaper Additional Tier 1 bonds.

The associations threw their weight behind the 50% AT1 compromise, describing the other two options as too stringent. They said the mixed approach would strengthen systemic stability without weakening the financial centre or unnecessarily worsening financing conditions for companies.

The government, which argues that stricter rules are needed to reinforce banks and shield taxpayers from the risk of another banking meltdown, estimates that its full package would require UBS to hold an additional $20 billion in capital. UBS has calculated that the AT1 option would mean finding another $13 billion.

Both UBS CEO Sergio Ermotti and Chairman Colm Kelleher have in recent days urged lawmakers to avoid imposing excessively harsh rules, saying that while the 50% AT1 option would be painful, it would be manageable. The debate over the capital regime follows the 2023 collapse of Credit Suisse.