UBS estimates that implementing the Swiss Council of States’ Economic Affairs Committee (WAK-S) proposal would require an additional $13 billion in Tier-1 capital, primarily in Additional Tier-1 (AT1) instruments.
The proposal, which mandates 50% hard core equity capital (CET1) and 50% AT1 backing for UBS’s foreign subsidiaries, contrasts with the Federal Council’s earlier suggestion of full CET1 coverage, which UBS previously estimated would require $20 billion in additional CET1 capital. Under current rules, UBS is required to hold 45% CET1 and 15% AT1.
The bank also noted that it must already meet $30 billion in additional Tier-1 capital requirements stemming from its acquisition of Credit Suisse, including $15 billion in CET1 capital. Meanwhile, regulatory changes announced earlier this year are expected to reduce consolidated CET1 capital needs by $4 billion.
In a statement, UBS acknowledged the WAK-S commission’s efforts but emphasized the proposal would significantly increase financing costs for Switzerland’s financial sector and broader economy. This comes as major international financial hubs are streamlining and tightening regulatory frameworks, potentially widening Switzerland’s competitive disadvantage.
UBS Chief Executive Sergio Ermotti, in a LinkedIn post, praised the commission’s work in exploring alternatives to the Federal Council’s stricter proposals. He also highlighted the WAK-S plan to better align Swiss AT1 instruments with global practices, enhancing their loss-absorption capacity in early crisis phases. Ermotti and Chairman Colm Kelleher have communicated similar sentiments internally to employees.
The public debate is expected to intensify in the coming months as UBS pledges continued constructive engagement in the regulatory process.
