SNB: UBS capital levels adequate under proposed requirements including reserves
The Swiss National Bank (SNB) has affirmed that UBS’s capital levels are adequate under the proposed regulatory requirements, including the necessary reserves, as outlined in the Swiss Federal Council’s final Capital Adequacy Ordinance (CAO) and the proposed amendments to the Banking Act. The SNB, alongside the Swiss Financial Market Supervisory Authority (FINMA), supports the measures aimed at strengthening the resilience of systemically important banks, particularly in the context of foreign participations resilience measures.
Under the new CAO, UBS’s capitalized software will be subject to a maximum three-year amortization period for capital purposes, while prudential valuation adjustments will result in higher capital deductions for assets with valuation uncertainty. These changes are expected to reduce UBS Group’s CET1 capital ratio by approximately 0.8 percentage points at the consolidated level and 0.4 percentage points at UBS AG standalone.
The proposed amendments to the Banking Act would require UBS to fully back its foreign participations with CET1 capital, with a phased implementation over seven years. This would necessitate an additional USD 20 billion in CET1 capital at UBS AG. Combined with the USD 2 billion impact from the CAO changes, UBS would need to hold an incremental USD 22 billion in CET1 capital at the consolidated level. Including the previously announced USD 15 billion in additional capital required from the Credit Suisse acquisition, UBS would be required to hold approximately USD 37 billion in CET1 capital in total.
Despite these requirements, the SNB and FINMA have concluded that the proposed measures are appropriate, necessary, and manageable for UBS. The SNB emphasized that UBS already maintains strong capital buffers and that the proposed changes align with the goal of ensuring financial stability without undermining the competitiveness of the Swiss financial center.
UBS has expressed concerns about the proposed measures, arguing that they lack international alignment and could have significant economic consequences for Switzerland. The bank has requested further clarification on the Federal Council’s pro-forma CET1 capital ratio of 15.5% and its peer comparison. Nevertheless, UBS remains committed to its business model and plans to continue engaging in fact-based discussions to support informed decision-making.
The SNB’s assessment underscores its confidence in UBS’s ability to meet the new capital requirements while maintaining its financial stability and operational resilience.
