\n few weeks ago<\/a>\u00a0in Zurich,\u00a0the SBA said: \u201cThe Federal
\n Council is ignoring the predominantly critical feedback from the
\n consultation process, particularly from the real economy and
\n around 16 cantons. These rightly point out that this maximalist
\n proposal and Switzerland\u2019s unilateral approach will weaken the
\n financial center, hamper the supply of credit and make financial
\n services more expensive for businesses.\u201d
\n<\/p>\n
\n \u201cThe SBA welcomes the fact that the Federal Council has moved
\n away from its extreme proposals in the Capital Adequacy
\n Ordinance. Although the new valuations for specific balance sheet
\n items such as software go beyond international standards, they
\n are now aligned with competing financial centers and are
\n therefore acceptable to the Swiss financial center. It is
\n positive that the vast majority of banks are now exempt from
\n further tightening measures,\u201d it said.\u00a0
\n<\/p>\n
\n From the SBA\u2019s perspective, the Federal Council\u2019s approach
\n regarding the capital adequacy requirements for foreign holdings
\n does not make Switzerland more stable, but instead leads to
\n Switzerland going it alone. Above all, this creates new
\n locational disadvantages, it said.
\n<\/p>\n
\n UBS comments
\n “UBS continues to strongly disagree with the proposed package,
\n which is extreme, lacks international alignment and disregards
\n concerns expressed by the majority of respondents to the
\n government\u2019s consultations. If adopted, the proposed measures
\n would have far-reaching consequences for the Swiss economy,” the
\n bank said in a statement yesterday. “The materials published by
\n the Swiss government today contain assertions that we believe to
\n be misleading. Considering UBS has just received this
\n information, it is in the process of thoroughly evaluating all
\n documents and statements made during the Federal Council\u2019s press
\n conference. UBS will provide additional comments at the latest
\n with its results for the first quarter of 2026, which will be
\n published on 29 April 2026.”
\n<\/p>\n
\n UBS said that under the new ordinance, UBS\u2019s capitalized software
\n will be subject to an amortization schedule of no more than three
\n years for capital purposes, regardless of economic useful life.
\n In addition, prudential valuation adjustments will be revised,
\n resulting in higher capital deductions for assets and liabilities
\n that are subject to valuation uncertainty. The treatment of
\n deferred tax assets arising from temporary differences remains
\n unchanged and aligned with international regulation, the bank
\n said.\u00a0
\n<\/p>\n
\n The bank said changes to prudential valuation adjustments will
\n become effective on January 1, 2027, while the changes to the
\n capital treatment of capitalized software must be put in force by
\n January 1, 2029. The amendments announced yesterday, once fully
\n implemented, are expected to remove about\u00a0$4 billion\u00a0of
\n net CET1 capital at the group (consolidated) level. This would
\n reduce the CET1 capital ratio at UBS Group by around 0.8
\n percentage points, UBS said.\u00a0
\n<\/p>\n
\n Under the proposal relating to foreign participations that will
\n now proceed through the parliamentary process, investments in
\n foreign participations would be fully deducted from UBS’s
\n standalone CET1 capital. The proposal provides that the
\n amendments would be phased in over seven years, assuming no
\n delays during the parliamentary deliberations, starting with a 65
\n per cent\u00a0deduction requirement in the first year and
\n increasing to 100 per cent\u00a0by 5 percentage-point increments
\n each year. The\u00a0full deduction of investments in foreign
\n subsidiaries would require UBS to hold additional CET1 capital of
\n around $20 billion, it said.\u00a0
\n<\/p>\n
\n Shock absorber\u00a0
\n The new package of regulation increases UBS’s Common Equity Tier
\n 1 (CET1) core capital by about $20 billion, Switzerland’s
\n governing Federal Council said in a statement. (The ratio is a
\n measure of the shock absorber capital banks are required to hold
\n against adverse market moves.)
\n<\/p>\n
\n The SBA has argued that the crisis in Credit Suisse that led it
\n to being acquired by UBS in an emergency takeover in 2023 was a
\n liquidity problem, not one about insufficient capital.\u00a0
\n<\/p>\n
\n In its statement yesterday, the SBA said it took a \u201cparticularly
\n critical view of the Federal Council\u2019s decision to tighten
\n capital adequacy requirements for foreign holdings.\u201d
\n<\/p>\n
\n \u201cSwitzerland already has strict capital requirements by
\n international standards. The proposed tightening contradicts both
\n the Basel Standards and international practice. Despite clear
\n criticism from the financial sector, large parts of the real
\n economy and a clear majority of the cantons, the Federal Council
\n is sticking to its controversial proposal. This will affect the
\n lending terms for bank customers and SMEs. At the same time, more
\n effective solutions are available,\u201d it said.\u00a0
\n<\/p>\n
\n The trade body said that the Federal Council\u2019s decision on the
\n Capital Adequacy Ordinance showed it had taken account of certain
\n criticisms raised during the consultation process.\u00a0
\n<\/p>\n
\n \u201cBanks may continue to count certain balance sheet items, such as
\n proprietary software and deferred tax assets, towards their
\n Common Equity Tier 1 capital.\u00a0
\n<\/p>\n
\n \u201cThe requirement to fully amortize software within three years at
\n the latest represents a clear tightening of the rules.
\n Switzerland is thus going beyond the current standard; however,
\n the tightening is aligned with competing financial centers and
\n therefore represents a viable solution for the Swiss financial
\n center,\u201d the SBA said.\u00a0
\n<\/p>\n
\n \u201cThe targeted improvements in the provision of information on
\n systemically important banks\u2019 liquidity positions are sensible.
\n In keeping with the Swiss principle of proportionality, many
\n banks that do not pose a threat to systemic stability are now
\n exempt from further tightening,\u201d the SBA continued.\u00a0
\n<\/p>\n
\n UBS
\n reiterated its critique<\/a> of the proposed rules in its annual
\n report, issued in March.
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\n<\/p>\n