UBS weighs Swiss exit or paying up as capital defeat nears

UBS is close to losing its fight against tougher Swiss capital rules. According to Bloomberg, that leaves the bank with two options: move its headquarters out of Switzerland, or stay and absorb billions of dollars in extra capital costs. Pressure from shareholders is also growing. This week a second large investor publicly urged the bank to leave.bloomberg+1

Bloomberg reported that UBS once sought advice on relocating from Nordea, the Finnish lender that moved its headquarters from Stockholm to Helsinki almost a decade ago. People familiar with the matter told Bloomberg that the talks did little to shift opinion inside UBS toward leaving.bloomberg

Parliament tightens the screws

On Sept. 23, Switzerland's upper house, the Council of States, passed a proposal that would require UBS to back its foreign units fully with 90% Common Equity Tier 1 (CET1) capital, the highest-quality form of bank capital. The measure is part of a banking overhaul triggered by Credit Suisse's collapse in 2023. The upper house rejected the government's stricter 100% plan. Today UBS must back those units with 60% capital, and it does not have to use only CET1. The bill now goes to the lower house.reuters+2

UBS estimates its domestic unit would need about $16 billion in extra CET1 under the 90% plan and about $20 billion under the 100% plan, though it would probably have several years to build that up. The bank said that if the upper house's decision is confirmed, it would have to hold about $33 billion of additional CET1 capital in total. The government's own estimates of the gap are lower, at $5 billion and $9 billion respectively.ubs+1

Investors push for a move

Artisan Partners, a US asset manager, says it manages more than 60 million UBS shares. In a letter to the board published late on Sept. 30, it called the rules "punitive." "The simple fact is that Switzerland is no longer an attractive or desirable location for UBS," the firm wrote, according to Reuters.reuters

Artisan estimated that if UBS did not have to tie up the extra $16 billion, that money could earn about $2.4 billion a year. It put the lost value at roughly $36 billion, or about 23% of the bank's market value. According to the Financial Times, Artisan said the rules would push UBS's CET1 capital from $56 billion to $72 billion. The Wall Street Journal reported that Artisan is the second major investor to call for a move.wsj+2

UBS holds its position

UBS said its goal is to keep operating as a global bank from Switzerland. It said it will protect shareholders through "informed decision-making" and will keep pushing for regulation that is "targeted, proportionate and internationally aligned". Before the upper house vote, Chairman Colm Kelleher warned that overly harsh rules could force the bank to reconsider its future in the country. Finance Minister Karin Keller-Sutter has said she thinks it is unlikely UBS will leave.reuters