UBS, the Swiss banking giant that acquired troubled Credit Suisse, could have its assets reduced to a quarter of its holdings if a proposal by a section of lawmakers in Switzerland succeeds, according to a local media outlet.

Social Democratic Party (SP) is working on a proposal to cap the combined assets of UBS estimated at 1.5 trillion Swiss francs. The left-wing party says the lender's assets pose considerable risk to the country because the state-backed its acquisition of Credit Suisse.

UBS Poses Risk to the Country, Party Says

In April, the Swiss government saved the imminent collapse of Credit Suisse with a financial rescue package guarantee of 109 billion Swiss francs. According to Samira Marti, an SP party member who spoke with the newspaper Aargauer Zeitung, the combined assets of UBS and Credit Suisse have surpassed the Swiss GDP which currently stands at 771 billion Swiss francs. This ought to be capped to less than half the amount, Marti said.

Furthermore, the politician noted that if the Parliament does not approve the limit cap, the alternative would be to have a stringent capital requirement for UBS's assets falling above half the GDP.

Government-Backed CHF 109B Guarantee

The Swiss parliament, a section of which opposed the government-backed rescue deal for Credit Suisse during a symbolic vote, is reportedly discussing having a 15% equity requirement imposed against UBS. "The aim is for UBS to become smaller," Marti said, adding that "we have to make improvements so that banks are less volatile."

Credit Suisse's problems escalated when the lender announced significant asset outflows during the first quarter of the year, including a CHF 15 billion write-down in Additional Tier 1 (AT 1) capital notes ordered by the industry regulator following the merger.

The lender's reported wealth management and net asset outflows were accompanied by massive staff layoff, which started in January and lasted until March before the UBS-Credit Suisse acquisition was announced. Additionally, UBS announced 36,000 job cuts in the finance and tech sector after the acquisition.

Meanwhile, UBS is not only facing opposition from the Swiss legislator concerning its acquisition; the country's prosecutors are also investigating the circumstances that surrounded the takeover to determine whether there was any criminal violation.

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