UBS weighs leaving Switzerland over capital rules, WSJ says

UBS ↘ 0.21% is preparing for the possibility of leaving Switzerland if Swiss lawmakers approve capital rules the bank considers too strict. The Wall Street Journal News Corp ↘ 0.54% reported that executives and consultants are building backup plans as parliament debates the country's too-big-to-fail banking law. The law is a response to UBS's 2023 rescue of Credit Suisse.money.usnews.com

According to the Journal, the options are buying a US financial institution and moving there, merging with a European rival, or selling to a US bank. The paper said potential US partners have already approached UBS, but no talks are underway and the bank has taken no formal steps toward a deal.bluewin.ch+1

Reuters reports similar planning

Reuters Thomson Reuters Corporation ↗ 1.04% separately reported, citing three people familiar with the matter, that a group inside UBS is looking at several scenarios. One is a list of smaller US banks the bank could buy. Another is UBS itself being taken over. People familiar with the bank's thinking named Morgan Stanley ↘ 0.84% as the best theoretical match. UBS Chairman Colm Kelleher spent many years at Morgan Stanley. UBS said it does not "comment on speculation." It has repeatedly said it is not planning to move.money.usnews.com

The Swiss government wants UBS to back its foreign units with 100% Common Equity Tier 1 (CET1) capital, which is the highest-quality form of bank capital. Today the bank has to back those units at 60%, partly with cheaper capital. In September, the upper house lowered the government's figure to 90%, but UBS still considers that too high. The bank estimates that the 90% level alone would require about $16 billion of extra CET1 capital. A lower house committee is set to start debating the rules later in October.ubs.com+1

Pressure from investors, doubts in Bern

Shareholders Artisan Partners ↘ 1.43% and Cevian Capital are pushing for a move. Artisan has called the planned rules "punitive." Chief Executive Sergio Ermotti recently told CNBC that staying in Switzerland is good for both the economy and shareholders. In September, Kelleher said he preferred a "Swiss compromise that allows us to stay in Switzerland".live.euronext.com+1

Finance Minister Karin Keller-Sutter, who has led the push for tougher rules, said in September that she thought it was unlikely UBS would leave because doing so would be costly and legally complicated. The Journal also noted the view that UBS may be using its options abroad to influence the parliamentary debate.bluewin.ch+1

Rival Swiss bankers are watching closely. "It would be a major change if they went," Christel Rendu de Lint, co-CEO of Vontobel, told Bloomberg TV. She noted that UBS is a major part of the Swiss economy and a large employer.bloomberg.com