Swiss Senate delays vote on UBS capital rules

The Swiss Council of States has postponed a vote on proposed capital requirements for UBS, the country’s last internationally active bank, SRF reported. The chamber will resume its debate next Wednesday, when Finance Minister Karin Keller-Sutter is also expected to speak.

The issue centres on whether UBS can prevail with its demands or whether the government and Keller-Sutter will secure stricter rules. The responsible committee proposed a compromise between the Federal Council’s position and the concerns of the cantons, business groups and UBS.

UBS currently has to cover 45 per cent of its foreign subsidiaries with hard equity. The committee’s proposal would raise that share to 50 per cent. The remaining half would be covered by redesigned AT1 bonds.

The bonds would be linked to conditions imposed on the bank to help stabilise it in a crisis. However, experts, the financial regulator and the central bank rejected the proposal.

Several members of the Council of States subsequently expressed doubts. Andrea Caroni of the FDP proposed removing the provision from the banking law or assigning the matter back to the Federal Council, but withdrew his motion at the last minute.

“The public would not understand if, after spending six months examining a package to regulate this important capital issue, we handed the hot potato back to the Federal Council,” said Pirmin Bischof of the Centre party.

Tiana Moser of the Liberal Greens was the first speaker to support the committee’s proposal. She said Switzerland needed to make its financial centre more resilient while ensuring that a major Swiss bank remained internationally competitive. The cantons of Zurich, Ticino and Geneva had also contacted the Council of States in support of the proposal.

The Social Democratic Party took a more cautious position. Like the Federal Council, it wants foreign subsidiaries to be fully covered by equity. Eva Herzog, a Social Democratic member of the Council of States, said the required capital build-up would amount to nine billion Swiss francs, which UBS had already set aside as a reserve.

Herzog said the bank could use the reserve to build capital instead of distributing it to shareholders. The Social Democrats could alternatively accept an equity ratio of 90 per cent, a proposal that also has some support within the Centre party.

The chamber did not have enough time to finish the debate and vote. The decision is due next Wednesday.