Switzerland's New Banking Rules: A Stricter Future for UBS

The Swiss government proposes stricter capital requirements for UBS after its Credit Suisse takeover, possibly adding $26 billion in core capital. This move aims to stabilize Switzerland's financial center and prevent future collapses. The proposal includes full capitalization of foreign units and potential reforms for market regulator FINMA.

The Swiss government unveiled plans for stricter regulations on UBS, following its acquisition of Credit Suisse, potentially requiring the bank to hold an additional $26 billion in core capital. These new rules intend to stabilize Switzerland's financial landscape and mitigate risks of another banking crisis.

Key proposals mandate full capitalization of UBS's foreign operations, moving away from the current 60% coverage. The government believes these measures will reduce reliance on Additional Tier 1 bonds and enhance confidence in the country's banking sector. Despite initial concerns, UBS shares surged over 6% post-announcement.

Further reforms aim to strengthen the financial regulator, FINMA, facing criticism for its handling of the Credit Suisse situation. Proposed changes include granting FINMA power to impose fines, regulate pay, and improve liquidity access to the Swiss National Bank. The federal council plans to begin stakeholder consultations by late 2025, with full implementation expected by the early 2030s.

(With inputs from agencies.)