UBS Warns Swiss Capital Rules Could Cost Billions, Hurt Competitiveness

UBS warned that proposed Swiss capital rules could cost billions and weaken its competitiveness. The bank estimates annual costs of about CHF 3 billion under the strictest proposal, or roughly CHF 2 billion under a 50/50 common-equity and AT1 approach. UBS reported continued progress integrating Credit Suisse, with more than 90% of inherited applications no longer in use and about three-quarters decommissioned. Wealth management remains a key growth area, particularly in the U.S. and across Asia. The bank plans to prioritize dividend growth and share buybacks while maintaining a 14% capital position. CEO Sergio Ermotti said AI could improve efficiency and support expansion, but UBS will continue investing in infrastructure and cybersecurity rather than favoring short-term repurchases.

UBS Group NYSE: UBS Chief Executive Officer Sergio Ermotti said proposed Swiss capital rules could impose substantial costs on the bank and create a competitive disadvantage, while also outlining continued progress on the integration of Credit Suisse and growth plans across wealth management. Speaking at Bank of America’s 31st Financial Conference, Ermotti said a proposal requiring 90% common-equity Tier 1 backing for foreign subsidiaries would be only marginally different from the Swiss Federal Council’s original 100% proposal. He said the difference would amount to about CHF 4 billion but would not address what he described as the central lesson from Credit Suisse’s failure: implementation of the existing regulatory framework.

“We don’t see this as a compromise, but rather as a little lighter version of the current proposal,” Ermotti said. He added that the approach would not be internationally aligned and could distort UBS’s competitive position.

Ermotti said an alternative proposal involving a 50/50 mix of common-equity Tier 1 capital and additional Tier 1, or AT1, instruments would still result in a significant increase in UBS’s Tier 1 capital requirements. He estimated that the Federal Council’s more stringent proposal would cost the bank about CHF 3 billion annually, while the 50/50 approach would reduce that estimated annual cost to about CHF 2 billion.

He also said shareholders had already absorbed roughly CHF 15 billion in forgone profits associated with stabilizing and restructuring Credit Suisse. On proposed changes to Swiss AT1 instruments, Ermotti said the measures would clarify the Swiss regime and align it with standards in the European Union and United Kingdom. He characterized the proposal as a balanced, though costly, approach and said it would not eliminate AT1 capital. The Swiss parliamentary process was expected to continue after an upper-house vote, with review by the lower house and potential reconciliation if the two chambers differed. Ermotti said he hoped the issue could be resolved by year-end, while noting the process had become politically complex ahead of Swiss elections.

Ermotti said UBS was making good progress on its operating plan and was seeing solid growth momentum, particularly in wealth management. He said front-office employees were increasingly focused on clients as integration work neared completion. In the investment bank, UBS expects transaction activity to increase year over year, although Ermotti said it was “very unlikely” to match the unusually strong third quarter recorded a year earlier...