Swiss Parliament's Upper House Backs Plan to Ease New Capital Demands on UBS

Switzerland's upper house voted to require UBS to back foreign units with 90% CET1 capital, a compromise between the government's 100% proposal and a 50% AT1 option. UBS shares rose 0.9% after the decision, which CEO Sergio Ermotti said would reduce the bank's additional capital bill by $4 billion, totaling around $18 billion. The bill will now move to the lower house, with a final decision expected by 2027.

UBS Group AG shares fell 1.8% to CHF 41.02 as CEO Sergio Ermotti opposed a Swiss parliament proposal requiring $20B in additional capital, warning of $3B annual costs. Ermotti also cautioned on Q3 2026 earnings growth, falling short of Q3 2025. The Swiss Market Index provided no support, and peer European lenders faced similar regulatory pressures.

UBS Group shares fell over 3% after CEO Sergio Ermotti criticized Swiss capital rules, arguing a 90% CET1 requirement would harm competitiveness. UBS supports alternative proposals, citing broader economic impacts and defending AT1 bonds as effective crisis tools. The Swiss parliament is set to vote on new rules following Credit Suisse's 2023 collapse.

UBS CEO Sergio Ermotti warned against excessive capital rules ahead of a Swiss parliamentary vote. The government proposes UBS hold an extra $20B in capital. Ermotti said 100% CET1 backing for foreign units is excessive, preferring a 90% compromise. UBS estimates it would need $13B in AT1 capital for a 50% requirement. The bank's chairman previously hinted at reconsidering its Swiss future if rules are too strict.

Swiss lawmakers propose revisiting UBS's banking regulations before a parliamentary vote. The compromise reduces capital requirements from the government's initial proposal of $20B to $13B in Additional Tier 1 capital. UBS argues the original plan would disadvantage it against competitors. The vote follows Credit Suisse's 2023 collapse and its subsequent acquisition by UBS.

Investors say UBS could save hundreds of millions annually if a parliamentary proposal allowing the use of Additional Tier 1 (AT1) bonds is approved, instead of the government's plan requiring Common Equity Tier 1 (CET1) capital. The proposal, which adds some new triggers, is seen as a victory for UBS, though it may face challenges in the lower chamber. AT1 bonds would cost UBS around 7%, cheaper than the 9-10% cost of CET1 capital, according to analysts.