Swiss government proposes tough new capital rules in major blow to UBS

2025-06-06 16:11:27

A mark in German reads “Part of the UBS group” in Basel on May 5, 2025.

Fabrice Covery AFP | Gety pictures

On Friday, the Swiss government proposed strict new capital bases that require a banking giant UBS For an additional $ 26 billion in Core Capital, following the seizure of 2023 Credit Suisse competing competition.

The measures also mean that UBS will need full benefit from its foreign units and perhaps Carry out fewer shares.

The government said in a statement on Friday, in reference to the UBS detention for the 1st Category (AT1): “The rise in continuity requirements must reach $ 26 billion in CET1 capital, to allow the AT1 bond property to reduce $ 8 billion,” in reference to the UBS contract for level 1 (AT1).

Consequently, the measures amount to an additional 26 billion dollars in the basic capital, but a condition of only $ 18 billion in the new capital. This is $ 2 billion from $ 20 billion, estimated at JP Morgan earlier this week.

UBS shares jumped by 6 % after the announcement and finished the trading session on Friday by 3.8 %.

Swiss Finance Minister Karen Keeler Street said during a press conference on Friday that the Swiss bank will become more stable and attractive in areas such as asset management. “I don’t think the competitiveness will weaken, but it is true that growth abroad will become more expensive,” she said in the comments reported by Reuters.

UBS said that it supports most of the organizational proposals announced on Friday, it does not strongly agree to the “extremist” increase in the requirements of capital. Based on the results of the first quarter of the bank, the company, which ranges between 12.5 % and 13 %-said in addition to the previously connected capital-it will be required to carry about $ 42 billion in additional Cet1 capital.

The bank maintained its goal of achieving a 15 % basic CET1 money, and also reaffirmed the intentions of this year’s capital.

The bank also said: “UBS will actively participate in the process of consulting with all stakeholders concerned and contributing to evaluating alternatives and effective solutions that lead to organizational change proposals with cost/reasonable results. UBS will also establish appropriate measures, if possible, to address the negative effects that extremist regulations will obtain on their shareholders.”

UBS can have to reconsider some operations after the ruling: analyst

Johann Schultz, chief stock analyst in Morningstar, indicated that the news was “bad as you will get UBS.”

Schultz said that the banking giant “can now click on some concessions and take some measures themselves to alleviate the effect, for example towards the source some of the extra capital from its subsidiaries.” He added that although negotiations will start immediately, there will be a long stage of UBS to publish measures, with their entire application in 2034.

JPMORGAN analysts, led by Kayan Abuhusen, confirmed that the long deadline from six to eight years until UBS meets the deduction of investments in its foreign units is a “positive” result of the bank. With the end of the completion of about 2027, JPMorgan expects full implementation by 2033 as soon as possible.

UBS is expected to generate about $ 12 billion [per annum] “The bank can” achieve a “capital gap” by 2033+ and still continues with re -purchases.

The Swiss National Bank said it has supported measures from the government because it “will greatly enhance” UBS flexibility.

“In addition to reducing the possibility of a largely important bank, such as UBS in financial distress, this procedure also increases the bank’s room to maneuver to stabilize a crisis through its own efforts. This makes it unlikely that UBS is rescued by the government in case of crisis,” SNB said in a statement on Friday.

“Blowed to fail”

UBS is fighting with the most comply on the ghost of the capital since obtaining the second largest bank at a cut price after years of strategic errors, mismanagement and scandals in Credit Suisse.

The democratization of the banking shock also made the Swiss Financial Organization, where it is under fire due to its rare supervision of the bank and the final timing of its intervention.

Swiss organizers argue that UBS must have stronger capital requirements to protect the national economy and the financial system, given that the bank’s balance amounted to $ 1.7 trillion in 2023, which is twice the Swiss economic product expected in almost last year. UBS insists that it is not “greater than failing” and that additional capital requirements – which have been appointed to drain cash liquidity – will affect the competitiveness of the bank.

At the heart of the confrontation, it presses concerns about UBS’s ability to store any potential losses in its foreign units, as it has so far had to have 60 % of the capital with capital in the mother bank.

The higher capital requirements can reduce the bank’s public budget and provide credit by enhancing the costs of financing the lender and suffocating their readiness for lending – in addition to the decline in their appetite for risks. For shareholders, the observation will be the potential impact on the available estimated money for distribution, including profits, shares and reward payments.

“While old works at Credit Suisse end, you should liberate capital and reduce UBS costs, many of these gains can be absorbed through the tougher regulatory demands,” said Johan Schultz, an arrow analyst at Moriningstar, in a note that precedes the Venma announcement.

“Such measures may put UBS much higher capital requirements than their competitors in the United States, which leads to pressure on returns and reduce its horizons to narrow the long -term evaluation gap. Even its excellent classification for a long time for the European banking sector may evaporate recently.”