ZURICH (Reuters) -The Swiss government on Friday published its proposals for stricter regulation of UBS, setting varying timelines for the introduction of rules that will have far-reaching consequences for the lender and its business model.
UBS will need to find up to $26 billion in additional core capital, while there are also new proposals to make it easier for banks to access central bank liquidity, to give the regulator more powers and to introduce bonus "clawbacks".
Some of the proposed rules, which are designed to make the banking system safer, will need to go through parliament in a process set to take years; other changes can be introduced directly by the governing Federal Council.
Following is an overview of the proposals and when the finalised rules could come into force:
KEY CAPITAL MEASURE NOT UNTIL 2028
* UBS must hold 100% of the capital in its foreign units at the parent bank, up from 60% currently, with parliament given the final word on the rule.
* UBS to get at least 6-8 years' transition period for new capital rules, the government proposes.
* The government will send a draft bill for formal consultation with political parties, business associations and other interested groups by autumn 2025.
* In 2026, the Federal Council plans to adopt the bill and submit it to parliament, which could modify the legislation.
* Final legislation will be passed in 2027 at the earliest and not come into force before 2028, the Swiss finance ministry said.
* If a referendum on the UBS capital rules is organised, avote can be held in 2028 at the earliest. That could sendparliament back to the drawing board or delay the rules.OTHER RULES EXPECTED IN 2027
* Stricter provisions to apply to the valuation of assets not sufficiently recoverable in a crisis, like software or deferred tax assets.
* These proposals are on the ordinance track, meaning the Federal Council can enact them directly after a feedback period.
* Final rules are expected to come into force in 2027.
NEW LIQUIDITY PROPOSALS
* The government proposes to make it easier for banks to access liquidity from the Swiss National Bank.
* Lenders will need to have collateral prepared in advance, with a minimum amount set for systemically important banks.
* Barriers to the transfer of collateral to the SNB will also be removed.
* Announcements that banks have accessed central bank liquidity may be deferred to minimise damage to lenders.
* The Public Liquidity Backstop proposals remain unchanged.
* Government to consider covered bonds as collateral for access to liquidity at a later date.
* These liquidity measures to be addressed at both legislative and ordinance levels.
MORE REGULATORY POWERS
* FINMA to get new powers to fine legal entities.
* The regulator should be able to intervene more easily and to issue fines to non-compliant institutions.
* Requirements for recovery and resolution plans to be increased and FINMA should be able to order measures to address deficiencies in recovery planning.
* These measures are on the longer legislative track, meaning final rules will not come into force before 2028.
RESPONSIBILITY AND REMUNERATION
* The government proposes to introduce a senior managers regime. Banks will need to assign clear responsibility to individuals, making them more accountable for breaches of duty.
* This should make it possible to claw back variable remuneration, cancel bonuses or withdraw recognitions from financial regulator FINMA, the government said.
* The government favours "effective clawbacks" for systemically important banks.
* Introducing a cap on bonuses is not seen as appropriate.
(Reporting by Ariane Luthi; Editing by Tommy Reggiori Wilkes and Catherine Evans)
