Swiss National Bank Backs Tougher Capital Rules for UBS Amid Banking Sector Reform

The Swiss National Bank (SNB) is backing tougher capital requirements for UBS as part of the government's banking reform proposals. SNB Vice Chairman Antoine Martin said that the increased concentration in the banking sector following UBS' takeover of Credit Suisse makes stronger rules urgent.

Martin cited weaknesses in the current regulatory framework, particularly in capital requirement and collateral preparation, which were exposed by the Credit Suisse crisis. He emphasized the importance of implementing 'too big to fail' regulations to address these weaknesses and ensure financial stability.

The government wants UBS to fully back its foreign subsidiaries with Common Equity Tier 1 (CET1) capital to prevent another banking crisis and protect taxpayers. However, UBS has argued that this proposal would require it to hold around $20 billion in additional CET1 core capital, which is excessive and would undermine its competitiveness.

The SNB's Martin emphasized that the overhaul is needed given UBS' significant market share, with the lender holding roughly a quarter of the Swiss deposit and loan market in 2024. He believes that 'too big to fail' measures proposed by the Federal Council, including full backing of foreign participations with 'hard capital', would make the Swiss financial market more resilient.