UBS Faces ‘Extreme’ 50% Rise in Capital, Kelleher Warns

(Bloomberg) — UBS Group AG Chairman Colm Kelleher said current reform plans by Switzerland would dramatically push up the bank’s capital requirements, as he seeks to show that the move would effectively render the global firm uncompetitive. 

“Finma and the Swiss National Bank stipulate additional capital requirements, which would also lead to a 50% increase in capital requirements as compared to today,” Kelleher said at UBS’s annual general meeting in Lucerne, Switzerland, on Thursday. He labeled the potential measures as “extreme.”

Implementing the reforms would “result in a CET1 ratio that would be 50% higher than that of our international competitors,” he said, referring to a regulatory measure of capital strength. 

UBS has been at loggerheads with the Swiss government and regulators ever since authorities presented plans last year to increase the capital demands by as much as $25 billion. Executives have suggested the firm could even shift its headquarters abroad if the government doesn’t back down, Bloomberg has reported.

UBS shares have whipsawed in recent days along with most European banks, on the back of the tariff announcements by the US government. Shares had their biggest intraday jump since 2009 on Thursday, trading at 23.45 Swiss francs at 11:46 a.m. 

The authorities’ intention is to increase UBS’s resilience after it agreed to take over Credit Suisse two years ago, making it even bigger. An expanded capital cushion may reduce the risk that UBS will ever face an existential crisis, which could plunge Switzerland into financial chaos.

UBS has been trying to persuade the Swiss government to moderate its proposal. Kelleher and Chief Executive Officer Sergio Ermotti have argued that the new demands wouldn’t address the issues that felled Credit Suisse, and they have warned that the plan would put UBS at a big disadvantage to its global competitors.

The government is due to present more details on the measures in June, which center on the capital held by UBS’s foreign subsidiaries. The matter will then be taken up by the Swiss parliament, with a conclusion unlikely before 2028. 

While UBS has been making its case for about a year already, the impending deadline is increasing the urgency. Finance Minister Karin Keller-Sutter has said she won’t be swayed by the efforts.

“Some stakeholders and media accuse us of overdoing our lobbying efforts in Bern,” Kelleher said. “Let me be crystal clear on the point: over-regulation in Switzerland is a very big risk to the long-term success of UBS.”

(Updates with further Kelleher comments and background)

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