By Adria Calatayud


UBS Group will need to substantially boost its capital after the Swiss government outlined plans to tighten regulation in the wake of last year's collapse of Credit Suisse.

The Swiss government said Wednesday that its review of the crisis at Credit Suisse found gaps in the existing regime and that the so-called regulations of too-big-to-fail banks needed to be strengthened.

The proposal came against the background of investors' concerns that UBS could face tougher rules after the takeover of its former rival. The deal, engineered by Swiss authorities and the first between two financial institutions considered systemically important at the global stage, left UBS as the only remaining bank with that status in Switzerland.

At 1415 GMT, shares in UBS fell 3.3%.

Quantitative and qualitative capital requirements for systemically important banks should be tightened in a targeted way and supplemented with a forward-looking component, the Swiss government said.

The size of additional capital needs for UBS will depend on the implementation of the measures and on the bank's future size and structure, the government said. However, the increase in requirements will be substantial, especially if UBS were to retain its current size and structure or grow, the government said.

The Swiss Bankers Association said the government's proposal brings risk of a wave of regulation that would be detrimental to the national economy, and called for targeted and moderate regulation.

UBS declined to comment. In its annual report published in late March, the bank sought to address concerns about its size and potential needs for tighter regulation, saying it learned lessons after analyzing the causes of Credit Suisse's troubles.

"First, there can be no regulatory solution for a broken business model. That is a job for executives and managers who must also be held accountable by engaged shareholders. And second, trust cannot be regulated," UBS Chairman Colm Kelleher and CEO Sergio Ermotti said in a letter attached to the report.

The government is examining giving powers to Swiss financial regulator Finma to impose fines, it said.

Certain measures proposed by the government apply to other banks and financial institutions as well, it said.

The government said the potential for liquidity provision by the Swiss National Bank should be significantly expanded and a public-liquidity backstop should be introduced as well. This would come on top of a requirement for systemically important banks to create additional liquidity buffers that was put in place at the start of the year, it said.


Write to Adria Calatayud at adria.calatayud@wsj.com


(END) Dow Jones Newswires

04-10-24 1108ET