Swiss upper house votes for 90% CET1 capital backing plan, in blow to UBS

Switzerland's ​upper house of parliament on Wednesday voted ​in favour of capital rules ‌that would require ​UBS to back its foreign units with 90% Common Equity Tier 1 capital, dealing a blow to the bank, which had ‌lobbied against it.

The capital rules bill, part of measures drawn up following the 2023 collapse of Credit Suisse, will now move to the lower house, with a final decision expected at the ‌end of this year at the earliest, and more likely in 2027. Shares in the ‌bank showed little reaction to the upper house decision. At 0744 GMT UBS shares were up 0.5%.

The government had proposed making UBS back its foreign units with 100% CET1 capital, a demand that UBS said was excessive and ⁠likely ​to make it less ⁠competitive. The upper house narrowly rejected the government's plan before backing the 90% CET1 capital option over a more ⁠moderate proposal agreed last month by an upper house committee to allow UBS to back foreign units with ​50% CET1 capital and 50% Additional Tier 1 (AT1) capital, which is cheaper to hold.

There ⁠were 29 votes for the 90% CET1 proposal and 16 for the 50% AT1 option. UBS CEO Sergio Ermotti ⁠said ​on Tuesday the 90% CET1 plan was no real compromise and urged support for the AT1 option.

In Monday's edition of the Neue Zuercher Zeitung newspaper Ermotti said excessive capital ⁠requirements would end up being borne not just by shareholders but also customers and employees. "We can ⁠live with a ⁠black eye, but two black eyes and a broken nose is too much. Yet that's exactly what the demand for capital backing of 90% ‌or 100% ‌comes down to," he said.