Swiss lawmakers delivered a blow to UBS Group AG executives by voting in favor of a plan that could force the global wealth manager to hold billions of dollars in extra capital. The upper house of Switzerland’s parliament voted 29 to 16 for an amendment requiring UBS to back its foreign units with high-quality equity capital up to 90% of their value. This decision is a minor adjustment from the government's original proposal of 100% backing and is seen as an interim victory for Swiss Finance Minister Karin Keller-Sutter, who has advocated for strengthening the bank's ability to sell off its international businesses safely during a crisis. UBS CEO Sergio Ermotti and Chairman Colm Kelleher had opposed both the 100% and 90% proposals, favoring an alternative plan using convertible debt.
UBS had stated that the 90% CET1 capital option was "not a compromise" and would significantly harm its competitiveness. The bank projected that implementing the 90% variant would necessitate building approximately $16 billion in additional capital, on top of the $2 billion already required under adapted capital regulations. This would result in estimated annual costs of around $2.5 billion for UBS following its acquisition of Credit Suisse. The Swiss Bankers Association supported UBS, calling the proposal an "extreme and very expensive regulatory approach" not seen in other major financial hubs.
Finance Minister Karin Keller-Sutter, however, strongly countered UBS's arguments, emphasizing that the bank possesses the necessary funds for this capital buildup. She questioned whether UBS would use these funds to strengthen the Swiss parent bank, as the Federal Council desires, or for shareholder payouts through dividends and share buybacks. Law professor Corinne Zellweger-Gutknecht viewed the decision as a good solution, strengthening the UBS parent bank and representing a successful political compromise for Switzerland's financial stability and the bank's competitiveness. Financial expert Andreas Ita, while noting the capital buildup over seven years is manageable for UBS, raised concerns about the permanent capital costs, which, although about CHF 400 million lower than the government's 100% plan, remain very high.
The extended uncertainty surrounding higher capital requirements has negatively impacted UBS's share price. While the stock is up about 10% this year, an index of European peers has seen more than a 20% gain. The decision now moves to the lower house of parliament, with a final decision not expected until 2027 at the earliest. Analysts suggest that the vote might lead to fresh speculation about UBS's future, ranging from potential mergers or acquisitions with non-Swiss banks to technical adjustments in capital allocation.
