Switzerland suggests UBS to add $ 26 billion in capital

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The Swiss government suggested increasing the requirements of UBS capital by up to $ 26 billion in an attempt to reduce the risk of another collapse similar to Credit Suisse, a previously called “extreme” and “excessive” move.

The FDF (FDF) said on Friday that it wanted to impose UBS To fully benefit from foreign subsidiary companies as part of a wide range of reforms for the country’s financial sector, despite the public pressure campaign by the bank’s management to alleviate the changes.

FDF said: “The Credit Suisse crisis explained that the Swiss bank’s capital base was insufficient.”

“The implementation of the measures package aims to reduce the possibility that another bank systematically important in Switzerland will enter into a severe crisis, and that emergency measures by the state will be required.”

Nowadays, UBS – which took over its opponent Credit Swiss In a rescue process sponsored by the state in 2023-it is required to match 60 percent of the capital in international subsidiary companies that bear capital in the mother bank.

FDF said that to meet the new 100 percent requirements, UBS will need to increase shared stock capital by about 26 billion dollars.

However, the bank will be allowed to reduce AT1 bond holdings by $ 8 billion, leaving it with a net “continuous” capital of $ 18 billion.

FDF said this was an estimate based on data 2024 and no change in the size of the UBS’s public budget or the likely assets of risk or their potential use of mitigation measures.

The “very large that fails” proposals, which are still subject to parliamentary approval, come after granting Credit Suisse capitalism in 2017 by the financial organizer in Switzerland, which actually allowed the bank to amplify the value of foreign subsidiary companies. The parliament report last year called this step “incomprehensible”.

New capital proposals for consultation will be offered in the fall, before submitting to Parliament. FDF said that the reforms will become law at the beginning of 2028 “as soon as possible”, while UBS will get a transitional period of “at least six to eight years” to implement changes once the legislation enters into force.

UBS has been imprisoned in a general conflict with the Swiss government and its organizers since reforms were raised for the first time in April last year, and will now have another opportunity to pressure legislators to reduce changes.

“The real pressure begins now, and we are preparing for negotiations to continue for years,” said one of the lawmakers from the House of Representatives. “It is known that Parliament is convinced in the past.”

The uncertainty surrounding the planned changes has been weighed on the bank’s share price, while its administration has argued that the additional capital requirements will harm its ability to compete at the international level.

“Growth abroad is still possible (for UBS),” said FDF. “However, in the future, increases in the value of foreign subsidiary companies or buying more foreign subsidiaries must be fully covered by capital and it is no longer partially funded by debts at the expense of the original bank.”

The shares in UBS jumped up to 6 percent in the aftermath of the proposals on Friday.

Besides capital reforms, FDF said it would suggest “strengthening targeting of bank quality.” The capital base. ”This includes processing assets that cannot be adequately recovered in a crisis, such as the costs of internal programs and deferred tax assets.

He said that “the organizational treatment of assets (this) … must be tightened,” which means that UBS will be required to add more capital as a result of these changes as well. This part of the package will be implemented through government decree, or the executive order, and it is likely to enter into force by early 2027.

Another package of amendments, which will go to Parliament next year, includes measures to increase the powers of the organizer and hold up supreme bankers.

The package will provide a large system of managers for all banks to clarify the responsibilities at the highest levels-the board of directors and the Executive Council-to cancel the misconduct by linking responsibilities with possible penalties.

The regulator also suggests the ability to smooth banks, as well as more tools to intervene early in emerging risk situations, including by imposing restrictions on profits and capital requirements. There is also the introduction of Clawback for reward payments into the important banks in cases of misconduct.

Political parties in Switzerland are divided on how to build UBS defenses.

For example, the dominant Swiss People’s Party has expressed concern about the impact of organizational changes, as some legislators instead suggested that the investment bank size in the lender suggested. Liberalists have raised concerns about future competitiveness, while left -wing parties support much stronger capital and liquidity requirements.

The Swiss democracy system means that after the package can be placed for the national vote. The draft law approved by Parliament can be challenged through a referendum if 50,000 signatures are collected in the country, which number about 9 million people. This would delay the law until 2029 – or kill it completely.

UBS did not immediately comment on the proposed repairs.