Swiss Parliamentary Committee Bows to UBS Pressure Over Capital Requirements

After two postponements, Switzerland’s Council of States Economic Affairs and Taxation Committee has taken its first position on the proposed “Lex UBS.” It chose a softer solution than the Federal Council wanted, placing UBS’s international competitiveness at the center of the decision.

The government had proposed requiring the value of UBS’s foreign subsidiaries to be covered entirely by hard equity. These funds can absorb losses. The current requirement is 45%.

The proposed increase aims to reduce the likelihood that the state would have to intervene during a future crisis. If a crisis hit a subsidiary such as UBS United States, full coverage would allow the parent company to sell the unit without drawing down its own capital.

Under the current arrangement, if the value of UBS United States falls by one Swiss franc, 55 centimes are effectively covered by the Swiss headquarters. That exposure could weaken the parent company. The committee nevertheless supported a less strict approach than the government’s proposal, following expectations from many experts.

The committee’s vote is the first stage of a much longer political process. The dispute pits demands for stronger protection against losses and possible public intervention against concerns that tougher rules could damage the competitiveness of the global wealth-management group.