The Swiss National Bank chief has pushed back against UBS’s criticism of proposed capital rules, saying the bank already has sufficient reserves to meet the requirements despite warnings that the changes could drive the lender abroad.
Martin Schlegel, president of the SNB, said in an interview with the Neue Zürcher Zeitung that the UBS would not need to raise additional capital beyond what it currently holds, factoring in existing reserves, to comply with the Bundesrat’s plan to require full hard equity backing for foreign subsidiaries. He described the measures as “not extreme” and proportionate to addressing weaknesses exposed by the Credit Suisse takeover in 2023, during which he served as the SNB’s deputy head for financial stability.
The Bundesrat’s “Lex UBS” proposal, introduced by Finance Minister Karin Keller-Sutter, seeks to increase the capital requirement for UBS’s foreign subsidiaries from the current 45 percent to 100 percent, a shift that would necessitate approximately $20 billion in additional equity, according to estimates cited across sources. The rule would also mandate the write-off of software assets within three years.
UBS reacted sharply to the plan, calling it “extreme” and internationally uncoordinated, arguing it ignores feedback from the consultation process and threatens the bank’s global competitiveness. CEO Sergio Ermotti warned the package could undermine the bank’s ability to compete with foreign peers.
Marcel Rohner, president of the Swiss Bankers Association and former UBS CEO during the 2008 financial crisis, warned that tying up such capital would force the UBS to operate with a competitive disadvantage, potentially making loans more expensive and scarcer in Switzerland, especially for riskier ventures like construction financing. He said a relocation of the bank’s headquarters could no longer be ruled out if regulatory divergence with other jurisdictions grows.
Schlegel countered that the SNB’s internal analysis shows the UBS already meets the proposed thresholds when reserves are considered, and that the rules are targeted and effective. He noted the SNB and Finma were consulted during the drafting, though final authority rests with the Bundesrat.
The debate highlights a split among banking experts, with some supporting the Bundesrat’s stance as a necessary lesson from the Credit Suisse crisis, while others warn it fails to account for how the UBS’s business model has evolved since then and could weaken Switzerland’s financial center.
Schlegel, returning from the IMF spring meetings in Washington, added that the mood among central banks and finance ministries globally is “not good,” underscoring broader unease in the financial system.
Why does the SNB believe UBS can meet the new capital rules without raising new funds?
The SNB’s internal calculations show that when existing reserves are factored in, UBS already holds enough equity to satisfy the proposed 100 percent backing requirement for foreign subsidiaries.
What specific risks does Marcel Rohner warn could arise if the rules are implemented as proposed?
Rohner warns that immobilizing $20 billion in capital would put UBS at a competitive disadvantage, potentially leading to more expensive and scarce credit in Switzerland, especially for riskier loans like construction financing, and could make a relocation of the bank’s headquarters a realistic possibility.
How does the Bundesrat justify the strict capital requirements for UBS?
The Bundesrat argues the measures are essential to increase the resilience of systemically important banks, drawing direct lessons from the Credit Suisse collapse, and views full equity backing of foreign subsidiaries as central to reducing taxpayer risk.
