According to a recent Bloomberg report, draft legislation in Switzerland — an outline of which is expected to be published next month — would require UBS to fully back the capital of its foreign subsidiaries, potentially forcing the bank to hold up to $25 billion in additional capital.
This marks a key step in Switzerland's broader rethink of banking regulation following the near-collapse and emergency rescue of Credit Suisse in 2023. UBS, now a significantly more complex institution, faces demands to simplify its resolvability and reduce systemic risk. By forcing a one-to-one capital match for foreign units, regulators aim to prevent contagion within the group — a concern made more urgent by the firm's tightly integrated legal structure.
UBS has fought fiercely against the measure, amid concerns that it could constrain dividends, impede acquisitions, and even prompt a redomiciling of its headquarters. Yet the government seems unmoved, suggesting a regulatory tone prioritizing resilience over competitiveness. This diverges from global trends, where governments are increasingly deemphasizing regulation and looking instead to promote growth and competitiveness.
Still, it bears noting that a lack of capital wasn't what brought down Credit Suisse, as the bank was generally considered to be well-capitalized. It is widely acknowledged, including by Switzerland's parliament, that governance failures, reputational damage, and supervisory shortcomings — not insufficient capital — ultimately proved fatal.
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