UBS AG said the Swiss parliament’s economic committee proposals to tighten bank capital rules would raise its Tier-1 capital needs by an additional $13 billion, primarily due to stricter requirements for foreign subsidiary exposures.
The bank’s internal calculations indicate the new rules would require 50% coverage of foreign subsidiaries with Common Equity Tier 1 (CET1) capital and up to 50% with Additional Tier 1 (AT1) instruments. Current regulations mandate 45% CET1 and 15% AT1 coverage, creating a significant incremental burden.
These proposed costs come on top of previously disclosed capital increases. UBS estimates it must already hold an additional $2 billion in CET1 capital under federal ordinance changes announced earlier this year. The bank also retains $15 billion in CET1 capital earmarked under post-Credit Suisse takeover mandates. Combined with the WAK-S recommendations, UBS’s total incremental Tier-1 capital requirement since the Credit Suisse acquisition reaches approximately $30 billion.
The Swiss Bankers Association criticized the proposals as disproportionate, arguing that international peers operate under less stringent rules. Federal Councillor Karin Keller-Sutter echoed concerns, stating that authorities view the plan as legally uncertain and impractical, noting that AT1 bonds remain debt instruments regardless of their regulatory treatment.
UBS emphasized that any regulatory adjustments should be internationally coordinated, proportionate, and focused on addressing the root causes of the Credit Suisse crisis. The bank also called for AT1 instruments to align more closely with global standards to enhance loss absorption during stress.
Swiss lawmakers may debate the draft legislation as early as September, with the lower house expected to follow. UBS shares initially rallied on the compromise proposal, briefly touching a 16-year high of 44.86 francs before paring gains to 43.35 francs, a 0.9% decline on the day. Year-to-date, the stock remains up 18% from 36.96 francs at end-2024, though it has retreated from a March low of 28.25 francs.
