UBS stock price rises, Swiss parliamentarians signal capital release and relaxation measures — The Financial Times of the UK

Investing.com - Swiss banking giant UBS shares rose Tuesday after a senior lawmaker in Switzerland privately assured UBS executives that strict new capital requirements would be softened, according to a report by the British Financial Times (FT).

The bank’s share price climbed by about 3%, but it is still down nearly 18% this year.

Learn more about market-moving news with InvestingPro

Citing sources familiar with the matter, the report says the core parliamentary group has told UBS executives they will “resolve the issue by reaching a compromise” to respond to a proposal put forward by the finance ministry that would increase the bank’s capital requirements by $22 billion.

The report adds that the government may publish its decision on the proposal as early as April, and the most controversial part of it—requirements for foreign capital—will then be submitted to parliament for debate.

The “too big to fail” reform plan was unveiled last year by Switzerland’s finance minister, Karin Keller-Sutter, after Credit Suisse collapsed in 2023. Regulators said these rules are necessary to protect depositors, while critics—including UBS—said the rules would damage Switzerland’s competitiveness and subject the bank to stricter oversight than its peers in the United States and the United Kingdom.

The plan has two main parts. The first concerns changes to administrative oversight, focusing on the quality of UBS’s capital. It would tighten the treatment of deferred tax assets, internal software, and other assets that are difficult to value, increasing core capital requirements by $2 billion to $3 billion.

However, according to the Financial Times, analysts estimate the broader impact could reach $11 billion because the measures would limit the types of capital UBS can count toward regulatory requirements.

The second part would require UBS to hold more capital for its international business, ensuring foreign subsidiaries can remain independently stable in a crisis without relying on the Swiss parent company.

Lawmakers have more room to influence or dilute the portion covering larger foreign subsidiaries, increasing the likelihood that the final burden could be reduced substantially. A key parliamentary committee on economic affairs and taxation is expected to take over this process in May.

According to the Financial Times, one person said, “From then on, we will have more decision-making power,” and full parliamentary debate could begin in June.

UBS executives were frustrated by what they see as the Swiss government’s reluctance to negotiate directly, and privately warned that failing to reach a compromise could prompt the bank to relocate to a more favorable jurisdiction.

An early compromise proposal would have allowed UBS to use additional tier-1 debt to meet half of the new capital requirements, but the finance ministry rejected it at the end of last year.

A person familiar with the bank’s thinking, according to the report, warned that the plan could still be harmful overall. “Even with assurances, there is no guarantee that the final outcome will be satisfactory.”

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.