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SWITZERLAND said it will keep to its schedule for implementing global bank capital rules despite continued wrangling over the standards in the United States, potentially putting its largest lender UBS Group at a competitive disadvantage.
The country’s Federal Council said on Wednesday (Jun 26) it has taken note of the recent developments and “despite delays in some countries, it sees no reason to deviate from its existing timetable.” The standards will apply from Jan 1, it said in a statement.
Bloomberg reported last week that Swiss banks including UBS were pressing the government to postpone part of the rules that relate to banks’ trading books.
Swiss and EU authorities were both set to roll out the rules in January, with the US and UK set to follow six months later, as part of a wider update of bank capital requirements designed to shore up the industry known as Basel III.
Yet, uncertainty over how and when the US will apply them has led the EU to plan a one-year delay in the new standards for the trading book, because that business is global in nature.
UBS had made the case that, without a pause, it would be one of very few major global banks forced to adopt the trading rules in January 2025, people familiar with the matter told Bloomberg.
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Switzerland’s other systemically important banks – Raiffeisen Group, Zuercher Kantonalbank, and PostFinance – have a much lower international presence than UBS.
Behind schedule
Higher capital requirements increase the financial reserves that banks have on hand to absorb losses, but impact profitability.
Authorities were due to implement the wider package some seven years after the measures were agreed by regulators on the Basel Committee on Banking Supervision as the final part of rule-making designed to prevent a repeat of the 2008 financial crisis. The implementation is already substantially behind the original schedule.
The topic has since become a political flash-point in the US and authorities are still fighting over what version of the wider package of measures, known in that country as Basel III Endgame, to agree on. They will not implement the new rules before the middle of next year at the earliest.
UBS is already facing substantially higher demands for financial reserves as a result of its larger size following the takeover of Credit Suisse.
In addition, the Swiss government is pushing for a revamp of the way the bank prepares for potential losses in its foreign holdings. Those changes could see its capital requirement rise by as much as US$25 billion.
The new Basel rules will increase UBS’ risk-weighted assets by around US$15 billion from 2025, with much of that impact expected to come from the trading rules, the lender said in February.
The firm had US$78.1 billion of highest quality capital and US$526.4 billion of risk-weighted assets at the end of March, its filings show.
UBS is pushing the Swiss government to clarify how much more the bank will need to hold in capital buffers after buying Credit Suisse, amid concerns the talks will drag on for months, unnerving investors, sources familiar with the matter said.
Some of the lender’s top executives had been relieved by the “too-big-to-fail” proposals the government published in April in response to Credit Suisse’s collapse, the sources said, seeing them as surprisingly mild and fluid.
But they have since grown concerned by signs from Stefan Walter, the new head of Swiss regulator Finma, that he wants UBS to hold more capital, the people said.
Some of the lender’s top executives are worried the government has not clarified whether the US$15 billion-US$25 billion in extra capital the finance minister, Karin Keller-Sutter, said in April that UBS may need, is on top of the US$19 billion it has already committed to hold to reflect its increased size, the people said.
UBS executives believe further demands could put it at a competitive disadvantage versus US and European peers. CEO Sergio Ermotti has hit out at calls for more regulation, saying it risks undermining Swiss banking. BLOOMBERG, REUTERS
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