UBS Shares Fall Over 3% Amid Standoff on Swiss Capital Requirements

Shares in UBS Group (SIX:UBSG) fell more than 3% on Tuesday after Chief Executive Sergio Ermotti publicly criticized proposed Swiss capital requirements, arguing they would harm the bank's global competitiveness ahead of a key parliamentary vote on the new regulations.

Bank Warns on Competitiveness

In a position paper released as the regulatory debate intensifies, UBS stated that while it supports targeted adjustments following the 2023 collapse of Credit Suisse, the current proposals are excessive. Ermotti said a potential requirement for the bank to back its foreign units with 90% Common Equity Tier 1 (CET1) capital, rather than the government’s proposed 100%, was not a "genuine compromise."

UBS argued that such stringent rules "would significantly damage UBS’s competitiveness" and impose broader costs on the Swiss economy. The bank asserted that its current scale reflects the strength of the Swiss economy and is already addressed through additional regulatory requirements layered on top of standard international rules.

Post-Credit Suisse Overhaul

The upper house of Switzerland's parliament is scheduled to vote Wednesday on the new capital framework, which was drafted in response to the state-orchestrated takeover of Credit Suisse by UBS last year. The debate highlights the ongoing political and regulatory fallout from the crisis and the challenge of overseeing a single, systemically dominant bank.

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UBS contended in its paper that the public discussion has been marked by differing interpretations and incomplete representations of the key issues at stake.

UBS Backs Alternative Plan

Instead of the government's proposal, UBS is backing an alternative from the Council of States’ economic committee, known as WAK-S. This plan focuses on strengthening Additional Tier 1 (AT1) instruments under a "50/50 model."

The bank claims this model protects taxpayers as effectively as the government's plan while triggering stabilizing measures earlier and more cost-efficiently. UBS also defended AT1 bonds as an established regulatory tool, arguing that had its preferred model been in place, it would have exposed Credit Suisse's problems as early as 2021, forcing corrective actions like dividend and bonus cuts.