SNB Reiterates Support for Full Capital Backing of UBS Amid Legislative Debate

UBS Group AG should be fully backed by its highest-quality equity capital in Switzerland, according to Swiss National Bank Vice President Antoine Martin. This view was shared at a time when lawmakers are discussing potentially watering down such a requirement. The SNB's intervention signals that officials are against the broad outlines of a compromise proposal being discussed in a key committee of the Swiss upper house.

Under this proposal, UBS would be allowed to meet as much as half of the government's requirement using less high-quality capital, a form of debt known as AT1 bonds. The SNB argues that full backing with 'hard capital' (Common Equity Tier 1 or CET1 capital) would make the Swiss financial market more resilient.

Martin also highlighted that higher capital requirements do not necessarily mean a bank becomes less profitable. He cited examples of US banks that have high capital and are highly profitable.

The SNB's moves to raise interest rates in 2022 and 2023 were warranted both with regard to price stability and from a financial stability perspective, Martin said.