Swiss National Bank’s Martin backs tougher capital rules for UBS

BASEL, Aug 26 (Reuters) – The Swiss National Bank on Wednesday repeated its backing for the government’s banking reform proposals, as the debate on plans to make UBS hold more capital enters a crucial phase.

SNB Vice Chairman Antoine Martin told an event in Basel that the increased concentration in the banking sector following UBS’s 2023 takeover of Credit Suisse made stronger rules urgent.

“The crisis at Credit Suisse revealed several weaknesses in the current regulatory framework, especially in the area of capital requirement and collateral preparation,” Martin told the event at the University of Basel.

“It is all the more important that Switzerland implement sound ‘too big to fail’ regulations and address these weaknesses, given the increased concentration and size of the Swiss banking sector relative to Swiss GDP,” he added.

The government wants UBS to fully back its foreign subsidiaries with Common Equity Tier 1 capital to help prevent another banking crisis and protect taxpayers.

But UBS has argued the proposal, which would require it to hold about $20 billion in additional CET1 core capital, is extreme and would undermine its competitiveness.

Lawmakers are due to meet again on Monday to find a compromise, after their parliamentary committee failed to reach an agreement earlier this month.

The SNB’s Martin said the overhaul was needed, given the size of UBS, with the lender holding roughly a quarter of the Swiss deposit and loan market in 2024, up from 14% of loans and 16% of deposits in 2022, before the Credit Suisse deal.

“The Too Big to Fail measures proposed by the Federal Council, in particular the full backing of foreign participations with ‘hard capital’ would make the Swiss financial market more resilient,” Martin said.

This would contribute toward financial stability, which was a precondition for price stability, which is the SNB’s primary goal, he added.

(Reporting by John Revill, editing by Ariane Luthi)