UBS must fully back foreign units with top-tier capital, Swiss central bank says

Three years after Credit Suisse imploded and forced one of the more uncomfortable shotgun weddings in banking history, Swiss regulators are still recalibrating the guardrails. The Swiss National Bank’s Vice President Antoine Martin said on August 26 that UBS must fully back its foreign subsidiaries with high-quality Common Equity Tier 1 capital held in Switzerland, a statement that lands with real weight given what the SNB estimates it would cost the bank to comply. The price tag, according to authorities: roughly $20 billion in additional CET1 capital. What the SNB is actually asking for Right now, UBS backs its foreign participations with somewhere between 45% and 60% CET1. The Federal Council formally proposed closing that gap on April 22, with the goal of taking coverage from a majority to full, 100% backing. The SNB estimates that if the reform had applied from January 1 of this year, UBS would have faced a shortfall of around $9 billion. Full implementation going forward would require approximately $20 billion more in qualifying capital. Martin acknowledged the competitiveness concern directly, pointing to well-capitalized US banks as evidence that carrying thick capital buff...