UBS Must Back Foreign Units with 'Hard Capital', SNB Vice-President Insists

Swiss National Bank (SNB) vice-president Antoine Martin emphasized that UBS should be required to fully back its international units with high-quality equity capital in Switzerland. This proposal, made by the Federal Council, would make the Swiss financial market more resilient, according to Martin.

In a speech on Wednesday, Martin stated that 'measures proposed by the Federal Council, in particular the full backing of foreign participations with hard capital (Common Equity Tier 1 or CET1 capital), would make the Swiss financial market more resilient.'

The SNB's intervention signals opposition to a compromise proposal being discussed in a key committee of the Swiss Senate. This plan would allow UBS to meet as much as half of the government's requirement using less high-quality capital, a form of debt known as AT1 bonds.

UBS argues that this plan is 'extreme,' making it uncompetitive. Lawmakers are debating alternative new requirements that would allow the lender to partially deploy convertible debt in the form of so-called AT1 bonds.