Swiss parliament debates tougher financial rules as lawmakers push back on anti-money laundering reforms Image credit: Euromaiden Press
(The Post News) – Swiss politicians are rebelling against the planned new anti-money laundering (AML) law, contending that it will make Switzerland a less competitive wealth management center. The new law would force banks and advisers to ask more probing questions of clients, but the critics contend that it would drive foreign investors overseas to other centers like Singapore and the United Arab Emirates.
UBS Group AG, Switzerland‘s largest bank, is in the middle of the controversy. UBS received USD 745.8 billion of deposits and USD 580 billion of loans held as of the close of 2024 on its four business segments ie wealth management, investment banking, retail and corporate banking, and asset management. The lawmakers are threatening that over-regulation will damage UBS and the financial system in general while competition for wealth management is mounting globally.
UBS Faces Higher Capital Requirements
Legislatorators also fell in line to keep the same timeline for more stringent capital requirements, which may force UBS to raise another USD 3 billion of capital as early as next year. The amendments affect banks’ valuations of assets such as home-grown software and deferred tax credits.
UBS stocks fell nearly 2% on Tuesday after the move, trailing behind the Swiss Market Index. Investors responded to fears of higher capital needs impacting profitability as UBS keeps absorbing Credit Suisse, which it acquired after the bank’s 2023 collapse.
The row is also a follow-up to Switzerland’s improved effort to strengthen its banking industry. Regulators would prefer UBS to retain up to USD 26 billion of surplus capital on hand to guard against future disasters, arguing that the bank is so large that Switzerland cannot risk rescuing it in case it goes bust.
Resistance to the AML law is strongest in the Swiss People’s Party, Liberals, and The Centre party group combined, who also hold parliamentary majority. They feel that Switzerland is already subject to stricter controls on the statute books than most financial centers.
The Swiss People’s Party’s Barbara Steinemann said:
“Whenever foreign powers threaten us with demands for transparency, we oblige in full. While rivals like Singapore fend them off and attract customers, we lose customers.”
Finance Minister Karin Keller-Sutter retorted that parliamentary amendments, such as exempting charities, trusts and most lawyers from further duties, already watered down the AML package. “These amendments undermine our capacity to fight financial crime,” she warned.
Global Wealth Competition
Switzerland remains the globe’s largest wealth management hub, but its reign may be temporary. Hong Kong will replace Switzerland as the number one cross-border wealth booking hub in 2025, a Boston Consulting Group estimate suggests. Singapore even surpassed Switzerland in 2024 with an 11.9% global inflows growth.
“This is a battle between financial centers and economic interests,” Steinemann said.
But specialists caution against sacrificing competitiveness at the cost of security. Anton Broennimann, who is the head of the Switzerland unit for combating financial crime, underscored:
“Switzerland should not become a criminal paradise. Stricter rules on risk business are needed, even if others dawdle.”
Parliament will continue debating the AML package, but vote on it no sooner than 2027, with implementation perhaps in 2028 or 2029. In the meantime, Switzerland is being pressured by the Financial Action Task Force to tighten the controls over veil structures and shell companies.
The choice will finally seal the fate of Switzerland as a secure and competitive financial hub, while alike rivals across the globe are already leaving it behind.
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