Top banking professor warns parliament against diluting UBS proposal: 'Today's UBS is structured like CS'

A prominent banking professor is urging the Swiss parliament not to weaken proposed capital requirements for UBS, warning that the bank's current structure mirrors that of the collapsed Credit Suisse. Professor Corinne Zellweger-Gutknecht believes influential proposals in the capital debate could dangerously dilute necessary reforms.

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These papers have great weaknesses in their current form. We want to make these visible and fix them with our proposal.

Zellweger-Gutknecht, along with fellow professor Yvan Lengwiler, submitted a reform proposal after a group of senators, led by Thierry Burkart, suggested allowing UBS to finance half of its foreign holdings with AT1 bonds instead of the full amount of hard equity demanded by the Federal Council. "These papers [AT1 bonds] have great weaknesses in their current form. We want to make these visible and fix them with our proposal," she stated.

Addressing concerns that regulators are punishing UBS for past failures in handling Credit Suisse, Zellweger-Gutknecht clarified that the goal is not punishment but preventing a third major bank bailout. She acknowledged the Federal Council had limited time to find a solution for Credit Suisse in March 2023, but noted the bank was not cooperative.

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It is simply about not wanting to experience a large bank having to be rescued by the state for the third time.

She emphasized that the current situation is not about penalizing UBS but about ensuring financial stability. The professor's intervention highlights the ongoing debate about how to effectively regulate global banks and prevent systemic risks, particularly in the wake of the Credit Suisse crisis.

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The Federal Council had very little time to find a solution for Switzerland with UBS and CS.