ZURICH, April 17 (Reuters) – Capital requirements proposed by the Swiss government for UBS could have a sustained drag on Switzerland’s economy, a study commissioned by the bank found, as a showdown over banking regulation intensifies.
Switzerland is tightening banking rules to bolster financial stability after Credit Suisse collapsed in 2023 and was taken over by UBS in a state-engineered rescue.
A government proposal requiring the banking giant to fully back its foreign units with Common Equity Tier 1 capital could reduce Switzerland’s annual gross domestic product by 1.3% to 3.9% over 10 years, consultancy BAK Economics said in the report.
The authors said UBS defined the topic of the study, while the research was conducted independently by BAK Economics, based on scenarios of a regulatory-driven credit contraction and simulations of knock-on effects on the real economy.
An earlier cost-benefit analysis of proposed UBS regulation commissioned by the Swiss government found that stricter capital requirements would increase the resilience of banks, reduce moral hazard and enable better loss absorption in the event of a crisis.
(Reporting by Ariane Luthi. Editing by Mark Potter)
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