Swiss Bankers Push Back on Capital Rules as Parliament Returns to the UBS Bill

The incoming chief executive of EFG International has warned against regulatory over-reach, and the Financial Times reports that his comments show opposition to the new rules extending across the Swiss banking industry rather than being confined to the largest bank. The timing matters. A Senate committee failed on 11 August to agree on tougher capital requirements for UBS and returns to the bill with compromise options still unresolved.

The rules follow directly from the collapse of Credit Suisse and its emergency absorption by UBS in 2023, which left Switzerland with a single global bank whose balance sheet is large relative to the national economy. Under the government's proposals, systemically important banks would have to back their holdings in foreign subsidiaries fully with common equity tier 1 capital, the highest-quality loss-absorbing capital, as set out in the finance department's too-big-to-fail framework. UBS estimates the requirement at roughly $23 billion of additional capital and argues it departs from international standards and hands foreign competitors an advantage.

Both sides of the argument are coherent. Requiring a bank to hold equity against foreign subsidiaries reduces the chance that Swiss taxpayers underwrite losses booked abroad. Requiring more equity than peers face also lowers return on equity, which is why UBS has raised the possibility of relocating its headquarters and why the Swiss Bankers Association says the government is disregarding critical feedback from cantons and from businesses.

The technical dispute reflects a larger question that the 2008 and 2023 rescues both raised. When a bank is guaranteed by the state in a crisis, capital rules are the price of that guarantee, and every reduction in the price moves the eventual cost from shareholders to the public.