Swiss Lawmakers Raise Alarm As UBS Assets Exceed GDP After Credit Suisse Takeover

UBS, a leading bank in Switzerland that acquired troubled lender Credit Suisse, could see its assets being reduced to a quarter of its current holdings. This change will likely happen if a proposal tabled by some of the legislatures in Switzerland passes.

Swiss legislatures propose cap on UBS assets

The plan to cap UBS assets was reported by a local media publication. The publication noted that the Social Democratic Party is currently working on a proposal to install a cap on the combined assets owned by UBS, valued at around 1.5 trillion Swiss francs.

The Social Democratic Party, which is a left-wing party, has also said that the assets owned by the lender pose a significant risk to the country following the state-influenced acquisition of Credit Suisse by UBS earlier this year.

The Swiss government proposed a deal in April this year to prevent the possible collapse of Credit Suisse. At the time, the government proposed a financial rescue package guarantee of 109 billion Swiss francs.

One of the members of the Social Democratic Party, Samira Marti, said that the total assets for both UBS and Credit Suisse have exceeded the Swiss GDP that currently stands at around 771 billion Swiss francs. Marti noted that the assets owned by UBS need to be capped to less than half of the current amount.

The lawmaker has also said that the failure of parliament to impose a limit cap on UBS assets will result in a strict capital requirement, with the assets owned by UBS dropping to above half of the GDP.

Lawmakers express concern with UBS takeover of Credit Suisse

The Swiss parliament has been deliberating on the takeover deal between UBS and Credit Suisse and the impact it will have on the economy. A section of members from the Swiss parliament opposed the state-backed takeover deal of Credit Suisse by UBS by participating in a vote. The lawmakers are also currently discussing imposing a 15% equity requirement against UBS.

Marti noted that the end goal of these proposals was to make UBS a smaller institution in terms of assets. The politician noted that these changes were necessary to ensure there was less volatility in the banking industry.

The woes that faced Credit Suisse worsened earlier this year after the lender revealed massive asset outflows in Q1 2023. The outflows included a CHF 15 billion write-down for Additional Tier 1 capital notes that was demanded by regulators following the merger.

The lender has also said that the wealth management and net asset outflows were followed by massive layoffs of staff members, which commenced in January before the acquisition deal between UBS and Credit Suisse was announced. UBS also revealed 36,000 job cuts in the finance and tech divisions after the UBS merger.

However, the deal is attracting much opposition from lawmakers across Switzerland. The takeover deal has also attracted the interest of prosecutors in the country, who are now investigating the circumstances surrounding the acquisition to uncover any criminal violations that may have occurred.