Swiss Upper House to Vote on UBS Capital Rules as Lawmakers Seek Government Handover

Switzerland's upper house of parliament is set to vote on Thursday on a compromise over new banking rules for UBS, with a separate motion seeking to return the draft legislation to the Federal Council.

A group of lawmakers has backed a motion to defer to the government on the capital requirements. The move was agreed late on Tuesday by members of the centre-right Liberals (FDP) in their parliamentary group, according to lawmaker Andrea Caroni.

"The Federal Council is the right body to decide on capital requirements," Caroni said, adding that he expected a majority of his group to support the motion and was hopeful it would pass.

The compromise, thrashed out last month, would impose a lower capital burden on UBS than the one sought by the Federal Council as part of measures to strengthen Swiss banks after the 2023 collapse of Credit Suisse, which UBS acquired.

Under the government's full set of proposals, UBS would have to hold an extra $20 billion in Common Equity Tier 1 capital. UBS has argued that making it fully back its foreign units with CET1 capital is excessive and would put it at a disadvantage against international rivals.

The upper house committee's compromise could allow UBS to use $13 billion in Additional Tier 1 capital to cover its foreign units.

If the motion succeeds, it would also need backing from the lower house. It could allow the Federal Council to introduce directly the stricter capital requirements favoured by Finance Minister Karin Keller-Sutter, an FDP member who argues the rules are needed to protect taxpayers from future banking collapses.

Whether the motion, due to be voted on alongside the AT1 compromise, will command a majority in the 46-member upper house remains uncertain. The FDP is not united on how best to overhaul the rules for UBS.

Fabio Regazzi of the Centre party, the largest group in the upper house, described the situation as fluid and said several outcomes remain possible.