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Dispute Over Equity: The Federal Council Meets UBS Partway – But Sets a Condition
🇨🇭 Switzerland /Economy & Trade

Dispute Over Equity: The Federal Council Meets UBS Partway – But Sets a Condition

From Neue Zürcher Zeitung · (1d ago) German Mixed tone

Translated from German, summarized and contextualized by DistantNews.

TLDR

  • The Swiss Federal Council has presented key elements of its banking regulation reform, aiming to strengthen the 'too big to fail' framework.
  • Systemically important banks will be required to fully back foreign holdings with equity, a measure largely targeting UBS.
  • While the Council is firm on equity backing for foreign assets, it has made concessions to UBS regarding software accounting and other regulatory points, aligning with EU practices.

The Swiss Federal Council has taken a significant step in reforming banking regulations, presenting a package of measures designed to bolster the 'too big to fail' framework and ensure that major banks like UBS can be managed in a crisis without burdening taxpayers. At the Neue Zürcher Zeitung, we view this as a necessary, albeit contentious, evolution in financial oversight. The requirement for systemically important banks to fully back foreign holdings with equity is a direct response to the vulnerabilities exposed in past crises and is, in essence, a 'Lex UBS' given the bank's unique global standing.

The Federal Council has presented central elements of its reform of banking regulation.

— NZZIntroducing the core announcement of the banking reform.

This reform package, spearheaded by Finance Minister Karin Keller-Sutter, aims for a dual approach: implementing the most debated aspect—equity backing for foreign assets—through legislation, while adjusting other points, such as software accounting, via ordinance. This distinction acknowledges the complexities and potential impacts on the banking sector. The debate over capital requirements has been fierce, with the UBS vehemently opposing stricter rules that could necessitate retaining profits for years. However, the Council's resolve on foreign asset backing signals a clear priority: financial stability over the immediate profitability concerns of a single institution.

They want to regulate UBS and the banking center as a whole more strictly.

— NZZExplaining the overarching goal of the new regulations.

While the Federal Council remains firm on the core issue of capital adequacy for foreign operations, it has shown a willingness to compromise on other fronts. Concessions regarding the amortization of software assets, aligning with EU regulations, and deferring contentious changes to AT1 bonds demonstrate a pragmatic approach. This balancing act seeks to strengthen Switzerland's financial sector without unduly stifling its competitiveness. The ultimate goal, as we see it, is to ensure the resilience of the Swiss banking hub while maintaining its international standing.

The government wants to introduce the newly presented rules on two levels.

— NZZDetailing the legislative and ordinance-based approach to the reforms.
DistantNews Editorial

Originally published by Neue Zürcher Zeitung in German. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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