ZURICH, April 22 (Reuters) - The Swiss government on Wednesday published draft legislation for stricter regulation of UBS, setting in motion a parliamentary process to enact new rules that could
Swiss Government Proposes Stricter UBS Rules Impacting Capital Requirements
Overview of Proposed Swiss Banking Regulations for UBS
ZURICH, April 22 (Reuters) - The Swiss government on Wednesday published draft legislation for stricter regulation of UBS, setting in motion a parliamentary process to enact new rules that could significantly affect the country's biggest bank.
Following is an overview of the draft rules and when the finalised versions could come into force:
Fully Backing Foreign Units
Key Changes to Capital Backing Requirements
* Under the major changes, systemically important banks in Switzerland should fully back their holdings in foreign subsidiaries with common equity tier 1 (CET1) capital, up from 60% currently.
Parliamentary Process and Transition Period
* Parliament will be able to debate the proposal from this summer.
* UBS will have a transition period of seven years for new capital rules, if there are no delays during parliamentary deliberations.
Implementation Timeline and Exemptions
* Amendments that concern capital backing for certain balance sheet items such as software will come into force on January 1, 2027. Software and deferred tax assets won't require full capital backing.
* The government decided against changing the rules for AT1 capital instruments for now as it awaits international developments.
Capital Ratios
Impact on UBS Capital Requirements
* The $20 billion increase in UBS' CET1 capital requirement is lower than the previously envisaged $26 billion because the volume of the bank's foreign shareholdings has declined, and because measures the government can introduce directly are more moderate than those requiring parliamentary approval.
Projected CET1 Capital Ratios
* After implementation of the measures, the possible future CET1 capital ratio of UBS Group based on pro forma calculations is 15.5%.
* The government said this is in line with other big international banks such as Morgan Stanley, Goldman Sachs and HSBC.
* At a group level, for UBS this corresponds to a CET1 capital ratio increase of around 1.1 percentage point compared with the fourth quarter of 2025, the government said.
Results of the Consultation
Feedback and Adjustments to the Proposals
* The plan to further strengthen financial stability was generally welcomed during a public consultation period on the government's preliminary proposals set out last year.
* The measures put forward on Wednesday are more moderate due to the results of the consultation procedure, the government said.
Rejected Ideas and Potential Delays
* Ideas put forward by some parties like a general increase in capital requirements or a separation of UBS's business in the United States were seen by the government as disproportionate.
* If a referendum on the UBS capital rules is organised, a vote can be held in 2028 at the earliest. This could further delay implementation of the rules.
(Reporting by John Revill; Editing by Tommy Reggiori Wilkes and Kirsten Donovan)
