Switzerland hits UBS with $26 billion added capital requirement
BERN—The Swiss government on Friday proposed stricter rules for UBS following its takeover of Credit Suisse, which could make it hold $26 billion more in core capital, confirming some of the bank’s worst fears about incoming new regulations.
The key proposal, which the bank would have six to eight years to prepare for after it became law, is that UBS must fully capitalize its foreign units, in line with what many analysts, lawmakers and executives had been expecting.
UBS shares, which have lagged European peers amid months of uncertainty about the proposals, jumped after they were made public on Friday afternoon, rising by as much as 7 percent, and on track for their best day since May 2024. Still, the bank slammed the capital plan as “extreme” and internationally out of line.
The government said its capital requirement proposal would allow UBS to reduce its holding of Additional Tier 1 (AT1) bonds by $8 billion. Today, UBS must only 60 percent capitalize its foreign units and can cover some of the capital with AT1 debt.
UBS executives say the additional capital burden will put the Zurich-based bank at a disadvantage to rivals and undermine the competitiveness of Switzerland as a financial center.
Credit Suisse collapse
Such was the shock in Switzerland over the 2023 collapse of Credit Suisse that top politicians led by Finance Minister Karin Keller-Sutter vowed to introduce more robust rules that would protect taxpayers and prevent another meltdown in future.
Keller-Sutter now holds Switzerland’s rotating one-year presidency and Friday’s announcement will start a long period of political wrangling over the measures, which the governing federal council called “targeted and proportionate.”
“They’re crucial for the stability of the financial sector and hence for protecting the economy and taxpayers,” Keller-Sutter told a press conference.
Depending on how UBS responds, the capital requirements could end up being significantly lower, she said.
A parliamentary inquiry last year noted that since UBS bought Credit Suisse for 3 billion Swiss francs ($3.65 billion) in March 2023, it has had a balance sheet bigger than the Swiss economy, and urged policymakers to take the foreign units into account.
The federal council said it would present drafts on the proposals for consultations with stakeholders in the second half of 2025. Finance Ministry officials say laws requiring parliamentary approval will not enter force before 2028.
Separate measures known as ordinances that can be issued directly by the government could apply from the start of 2027.
