Swiss Upper House Backs 90% CET1 Capital Rule for UBS Foreign Units

Switzerland's upper house of parliament has voted in favour of capital rules that would require UBS to back its foreign units with 90% Common Equity Tier 1 capital, delivering a setback to the bank, which had campaigned against the measure.

The bill forms part of a package of measures drawn up in the wake of Credit Suisse's 2023 collapse. It now moves to the lower house of parliament, where a final decision is expected at the end of this year at the earliest, and more likely in 2027.

The government had originally proposed requiring UBS to back its foreign units with 100% CET1 capital. UBS argued that the demand was excessive and would weaken its competitive position. The upper house narrowly rejected the government's option before endorsing the 90% CET1 backing requirement.

UBS CEO Sergio Ermotti said on Tuesday that the 90% CET1 option did not amount to a genuine compromise. He lobbied instead for a more moderate approach under which the bank would back foreign units with 50% CET1 capital and 50% Additional Tier 1 capital, which is cheaper to hold.