• UBS rejects tougher Swiss bank capital proposals after Credit Suisse collapse
• The bank says new rules could require $24 billion in extra capital
• UBS warns higher costs would hurt competitiveness and customers
• Business groups support UBS and call for less costly alternatives
• Political parties are split over how strict reforms should be
• UBS argues Credit Suisse failed due to regulatory flexibility, not weak rules
• Government consultations began in September
• Markets expect a compromise as UBS shares rally

UBS has pushed back against Swiss government proposals to strengthen banking rules in the wake of the Credit Suisse collapse, warning the measures would damage Switzerland’s competitiveness and impose excessive costs on the country’s sole remaining global bank.

In a statement on Monday, Europe’s largest wealth manager said the proposed reforms would force UBS to hold an additional $24 billion in capital, largely due to requirements that it fully capitalize its foreign subsidiaries.

The bank argued that such measures would be disproportionate and out of line with international standards.

“The proposal would lead to huge added costs and endanger the continuation of the successful business model,” UBS said, adding that the approach to foreign units went beyond what global competitors face.

UBS became Switzerland’s only global banking champion after Credit Suisse collapsed in 2023, prompting a state-backed rescue.

In response, the Swiss government pledged to overhaul banking regulation to prevent a repeat crisis and ensure taxpayers would not again be exposed to bailout risks.

The reform package, launched for consultation in September, is designed to tighten capital requirements and reduce regulatory discretion. Stakeholders were given until early January to submit responses.

Business and banking lobby groups have broadly sided with UBS. Economiesuisse, a major business association, warned that higher capital costs would ripple through the economy, negatively affecting Swiss industry and investment.

Political reactions have been split. The right-wing Swiss People’s Party said it favored a compromise that would preserve UBS’s ability to compete internationally, while the center-left Social Democrats and the Green Party voiced support for the tougher proposals as a necessary safeguard against future crises.

UBS also raised concerns about the potential impact on customers. The bank said that if stricter requirements had to be met primarily through Common Equity Tier 1 capital, the most expensive form of capital, this would likely translate into higher costs for clients and a tighter supply of credit.

To mitigate that risk, UBS called for greater recognition of Additional Tier 1 instruments and bail-in bonds.

It argued that AT1 debt should be strengthened and treated in line with practices in the European Union and the United Kingdom, rather than being sidelined in favor of more costly equity buffers.

The lender also contended that Credit Suisse’s downfall was not the result of insufficient capital rules, but of regulatory flexibility.

According to UBS, had existing Swiss regulations been applied more rigorously, Credit Suisse would have been forced to make adjustments earlier, potentially averting its collapse.

The Swiss Banking Association echoed that view, saying the crisis stemmed from excessive regulatory latitude rather than weak capital standards. Simply avoiding such concessions in the future would be sufficient, the group said.

Despite publicly defending its tough stance, the government appears open to compromise. Sources familiar with the discussions say regulators are preparing to soften some of the proposed rules that fall directly under government control.

Lawmakers have also signaled that parliament is unlikely to adopt the most stringent version of the reforms initially outlined by officials. In December, Reuters reported that the final framework is expected to be more moderate than first proposed.

Investor sentiment suggests markets are already pricing in a softer outcome. UBS shares have risen more than 20 percent since the start of December, buoyed in part by optimism that the capital requirements will be watered down.