(Bloomberg) -- UBS Group AG Chairman Colm Kelleher said that the Swiss government’s proposal to require the bank to hold substantially more capital is the “wrong remedy” to the failings that brought down Credit Suisse over a year ago. 

“We are seriously concerned about some of the discussions related to additional capital requirements,” Kelleher said at the bank’s annual general meeting in Basel, Switzerland, on Wednesday. “It is imperative that our regulatory policies ensure a level playing field. In other words, Switzerland’s regulation must remain broadly aligned with global standards.”

The Swiss government unveiled a raft of regulatory proposals earlier this month in response to the Credit Suisse crisis that could see the nation’s biggest bank hit with around $20 billion in extra capital requirements. UBS argues that it wasn’t a lack of capital that brought down Credit Suisse, but a broken business model that fatally undermined confidence. 

Read More: UBS Is Said to Face $20 Billion Capital Hit Under Swiss Plan 

“Capital requirements for global systemically important banks have significantly increased over the past 15 years,” Kelleher said. “Our ability to acquire Credit Suisse underscores that the regulatory framework was not the problem.”

UBS shares were down 2%, trading at 25.25 Swiss francs at 1:34 p.m. in Zurich. 

Read More: UBS Faces Higher Capital Requirement in Swiss Bank Reform

The Federal Council proposed that systemically-important Swiss banks must hold significantly more capital against their foreign units. In addition, bank-specific capital levels should be boosted to take future risks more into account. 

The proposed reforms effectively single out UBS as the country’s sole globally-systemic lender, setting the government now on a collision course with the bank. The government can implement changes in the capital regime without further parliamentary approval. The implementation of the relevant ordinance would likely take place in 2026 at the earliest.

Speaking after Kelleher, UBS Chief Executive Officer Sergio Ermotti said that the bank is working through a “pivotal year” in 2024. Milestones for the integration of Credit Suisse this year include the legal merger of the parent banks and the establishment of a single holding company in the US. 

To achieve the bank’s longer term financial targets, “we may have to sacrifice some reported profitability and growth in the short-term,” Ermotti said. “But we are convinced this will further strengthen the quality and stability of our long-term earnings potential.”

In February, UBS unveiled updated profitability targets, vowing to hit a 15% return on CET1 capital within three years and 18% in 2028.

UBS defended its executive pay policy for 2023, in which Ermotti received some $16 million in total compensation for nine months in charge. Some shareholders criticized the package as disproportionate.

“The board has recognized the excellent performance of Sergio Ermotti during a defining year in UBS’s history,” Kelleher said. “He arguably has the toughest job in the financial services globally.”

UBS was also called on to defend its policy on climate change, in particular in relation to financing of coal extraction. UBS scrapped a planned phaseout of coal financing that Credit Suisse had backed, as part of its integration of the two banks’ sustainability policies. 

Read More: UBS Ditches Credit Suisse Plan to Phase Out Coal Financing

“Our coal policy has been effective in restricting UBS’s exposure to coal,” Kelleher said. He added that UBS had prioritized its own sustainability framework over Credit Suisse’s, as it had “broader application across sectors and generally stronger risk mitigants.”

(Updates with share price. A previous version of the story was corrected to amend ‘million’ for ‘billion’ in 11th paragraph)

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