UBS faces capital hit as high as US$25 billion, minister says

UBS Group faces an increase in regulatory capital requirements that could reach US$15 billion to US$25 billion under reforms proposed in the wake of the collapse of Credit Suisse, Swiss Finance Minister Karin Keller-Sutter told Tages-Anzeiger.

Such figures are “plausible,” Keller-Sutter said on Monday (Apr 15) when asked about estimates by analysts and other publications, the newspaper said.

UBS shares fell as much as 3.7 per cent in Zurich, having dropped more than 6 per cent last week as investors digested the proposals.

The Federal Council is proposing that systemically important Swiss banks must hold significantly more capital against their foreign units, according to a wide-ranging report on banking stability released last week. In addition, bank-specific capital levels should be boosted to take future risks more into account. 

The proposals, which effectively single out UBS as the country’s sole globally systemic lender, would see the lender face a “substantial” increase in regulatory capital requirements, the Swiss government said last week.

Swiss newspaper Handelszeitung earlier reported the possibility of a US$25 billion hit, while Autonomous Research analyst Stef Stalmann has said that additional capital requirements in the US$10 billion to US$15 billion range could dent expectations for share buybacks. 

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Stalmann also noted that the proposed time frame for the reforms – with the implementation of the relevant ordinance taking place in 2026 at the earliest – would create heightened uncertainty around capital planning and payout prospects.

A spokesperson for UBS declined to comment. 

The lender’s executives have already spoken out against the need for more capital. Chairman Colm Kelleher argued against higher capital requirements, in an interview with the Neue Zurcher Zeitung last month. 

“If you have too much capital, you penalise the shareholders but also the clients, because banking services become more expensive,” he said. “We already have capital buffers that are well above the regulatory minimum.”

The proposals are part of a sweeping response to Switzerland’s most severe financial crisis in over a decade, addressing a weakness that helped accelerate Credit Suisse’s demise last year. BLOOMBERG