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ZURICH - Swiss banking giant UBS (NYSE:UBS) (SWX:UBSN) has expressed support for the majority of the new regulatory proposals put forth by the Swiss Federal Council. However, the bank has voiced strong opposition to a proposed substantial increase in capital requirements, which it believes to be disproportionate and misaligned with international standards.
The proposed regulations would necessitate UBS to fully deduct investments in foreign subsidiaries from its Common Equity Tier 1 (CET1) capital, as well as deferred tax assets on temporary differences, and capitalized software. These changes would require UBS to hold an additional estimated CET1 capital of approximately USD 24 billion on a pro-forma basis, based on first-quarter financials of 2025.
This additional capital requirement is on top of the USD 18 billion incremental capital UBS is expected to hold following the acquisition of Credit Suisse. This acquisition-related capital includes USD 9 billion to remove regulatory concessions granted to Credit Suisse and another USD 9 billion to meet the requirements due to the increased size of the combined businesses. Consequently, UBS would need to maintain around USD 42 billion in additional CET1 capital in total.
Despite these proposed changes, which are not expected to take effect until 2027, UBS maintains its financial targets, including an underlying return on CET1 capital of around 15% and a cost/income ratio of less than 70% by the end of 2026.
UBS has also reaffirmed its capital return intentions for 2025, planning to accrue for a 10% increase in ordinary dividend per share and repurchase up to USD 2 billion of shares in the latter half of the year, subject to maintaining a CET1 capital ratio target of around 14%.
The bank intends to actively engage in the consultation process to discuss alternative solutions that balance regulatory changes with reasonable cost/benefit outcomes. UBS will also consider measures to mitigate the impact of the stringent regulations on its shareholders.
The information in this article is based on a press release statement from UBS, which is reviewing the extensive details of the proposals and will provide further assessments in the future.
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