The country's largest bank, and a handful of other systemically important banks – face higher regulatory capital requirements, as reported last week. A story suggested that UBS could have to set aside as much as $20 billion in additional capital.

Following recent Swiss federal government reform proposals, UBS – the country’s sole remaining universal bank after buying Credit Suisse a year ago – faces an increase of around $20 billion in capital requirements, Bloomberg reported earlier this week. 

Swiss Finance Minister Karin Keller-Sutter is aiming for systemically important lenders to have full capital backing against their foreign units, the report, citing unnamed sources, said. 

For UBS, the changes are likely to translate into a capital hit in the middle of the $15 billion to $25 billion range that analysts and media have estimated, the report continued.

"It is likely that UBS will have to carry significantly more capital. UBS is overcapitalised as it stands, so we do not expect it to have to raise capital, but it could limit UBS’ dividend payouts and share buybacks," Johann Scholtz, equity analyst, Morningstar said in a note yesterday. 

Shares in the Zurich-listed lender fell as much as 4 per cent on the Swiss stock market on Tuesday, having dropped more than 6 per cent last week as investors digested the proposals. They recovered slightly yesterday.

The newswire report said UBS declined to comment. WealthBriefing contacted UBS for comment; it hadn’t received a reply at the time of going to press.

The Federal Council wants systemically important Swiss banks – such as UBS – to hold significantly more capital against their foreign units. UBS, Raiffeisen Group, Zürcher Kantonalbank and PostFinance are all deemed to be systemically important lenders.

Swiss policymakers have been examining ways to tighten controls and supervision of the country’s banking system – a major earner of export revenues. They are haunted by the fact that the UBS balance sheet, at about $1.7 trillion, is about double Switzerland’s annual economic output.  According to official government data, the financial sector accounted for 23 per cent of total services exports in 2021.

One of the ironies is that when UBS acquired Credit Suisse for $3.2 billion at the behest of the Swiss federal government, that purchase price was seen as cheap. However, holders of AT1 debt – a form of risk capital that European banks issued after the 2008 financial crash – were wiped out, prompting litigation from bondholders. As a result of the Swiss government’s support of the UBS takeover, it caused a complete write-down of SFr16 billion ($17.3 billion) of the bank’s AT1 bonds in order to increase core capital. Holders of some equities appeared to have gained more protection than holders of the ATIs.