SNB: Proposed capital regulation will not make UBS intl' outlier

The Swiss National Bank (SNB) has stated that the proposed capital regulation changes will not make UBS an international outlier, despite the bank’s concerns over the impact of the new rules. The SNB emphasized that the reforms will “significantly strengthen” UBS’s resilience and reduce likelihood of financial distress. The central bank noted that the proposed measures will enhance UBS’s crisis stability.

Under the proposals, UBS would be required to fully deduct foreign subsidiary investments, along with deferred tax assets on temporary differences and capitalized software. Based on its first-quarter 2025 financials, UBS estimates that the changes would necessitate an additional USD 24 billion in CET1 capital at the UBS AG level, bringing the total additional capital requirement to around USD 42 billion when combined with the impact of the Credit Suisse acquisition. The Swiss Federal Council has also introduced a phased implementation of foreign participation deductions, starting at 65% in the first year and increasing by 5 percentage points annually until reaching 100%.

UBS has criticized the proposals as “extreme” and misaligned with international standards, arguing that they would disproportionately affect its capital position. The bank has also raised concerns about the potential negative impact on the Swiss economy, citing a study by BAK Economics that estimates cumulative GDP losses of CHF 34 billion. Despite these concerns, UBS has reaffirmed its commitment to maintaining a CET1 capital ratio target of around 14% and achieving its financial goals, including a 15% return on CET1.

The proposed regulations are expected to take effect from 2027, with a transition period allowing UBS to adjust. The Swiss government has submitted the proposals to parliament for approval, and UBS has indicated it will continue to engage in the consultation.