Proposed Capital Requirements Pose Challenges for UBS Growth

Switzerland’s Finance Minister, Karin Keller-Sutter, has warned that the Swiss government’s proposed stricter capital requirements for the banking sector will impact UBS’s ability to expand.

In an interview with Aargauer Zeitung published on Saturday, Keller-Sutter explained that if the regulatory package, announced to prevent a recurrence of Credit Suisse’s collapse, is implemented, UBS will be compelled to maintain higher capital reserves. This, she noted, would make growth more costly for the bank.

The proposed regulatory changes, aimed at the country’s four largest banks, consist of 22 measures and over 200 pages of recommendations to regulate institutions considered “too big to fail” (TBTF). The government plans to swiftly implement these measures, with two packages slated for introduction in the first half of 2025.

Keller-Sutter emphasized a key proposal targeting how Swiss parent companies of UBS and other systemic banks must back their foreign holdings in the future, potentially requiring up to 100% equity compared to the current 60%. She highlighted that altering this regulation could have implications for UBS’s growth and size, while also streamlining crisis management with foreign authorities.

Analysts estimate that UBS might need to retain $10 billion to $15 billion in excess capital under the proposed changes.

In the interview, Keller-Sutter reiterated criticism of UBS CEO Sergio Ermotti’s pay package, which totalled 14.4 million Swiss francs ($15.75 million) last year. She expressed concerns that such remuneration could be detrimental to UBS’s interests.