UBS shares moved higher on Tuesday after senior Swiss parliamentarians privately told the bankxecutives they intended to temper proposed capital rules, according to people with knowledge of the discussions. The stock rose by about 3% on the news, though it remains down close to 18% year to date.
The assurances reportedly centered on a finance ministry package that would increase UBS apital requirements by $22 billion. A core group of parliamentarians told the bank they would "solve the problem by agreeing on a compromise," according to the people cited. The government could publish its decision on the package as soon as April, after which the most disputed element - foreign capital requirements - would move to parliament for further debate.
The package was unveiled last year by Swiss finance minister Karin Keller-Sutter following the 2023 collapse of Credit Suisse. Regulators defending the proposals say the measures are necessary to protect depositors. Critics, including UBS, argue the rules would damage Switzerland ompetitiveness and leave UBS subject to stricter regulation than some large peers in the United States and the United Kingdom.
The reform has two principal components. The first focuses on executive regulation changes aimed at strengthening the quality of UBS apital. This would tighten the treatment of deferred tax assets, in-house software and other hard-to-value items, and is expected to add between $2 billion and $3 billion to core capital requirements. Analysts cited in the report estimate the broader impact could be closer to $11 billion because the measures would restrict the forms of capital UBS can count toward regulatory thresholds.
The second major element would require UBS to hold substantially more capital for its international operations, with the stated goal of ensuring foreign subsidiaries can be stabilised independently during a crisis rather than relying on the Swiss parent.
Lawmakers are understood to have more latitude to influence or dilute the foreign-subsidiary component, raising the prospect that the final burden on the bank could be materially reduced. A key parliamentary economic affairs and taxation committee is expected to take over consideration of the matter in May. "We will have more decision-making power," one person reportedly said, with a full parliamentary debate likely from June.
UBS executives have privately expressed frustration at the Swiss governmentor what they see as an unwillingness to negotiate directly. Bank management has warned that a failure to reach an acceptable compromise could prompt UBS to consider relocating to a jurisdiction perceived as more favourable.
An earlier compromise suggested that UBS could use additional tier one debt to cover half of the new capital demands, but that proposal was rejected by the finance ministry late last year.
Notwithstanding the private assurances from lawmakers, concerns remain. One person familiar with the bank oncluded that the package could still be damaging overall: "Even if assurances are made, there is no guarantee that the end result will be palatable."
Context on market reaction and analysis
The immediate market response - a roughly 3% rise in UBS shares - reflects investor attention to the potential for reduced capital burdens. However, the stock ontinues to trade well below its level at the start of the year, down nearly 18% year to date.
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What happens next
- The government may publish its decision on the package as soon as April.
- The parliamentary committee is expected to assume control of the file in May, with a full debate likely beginning in June.
These upcoming steps will determine whether the assurances offered privately by some lawmakers translate into a materially softened set of requirements for UBS, or whether the final package remains burdensome for the bank.