UBS gaining support for compromise on Swiss capital rules

UBS will have to raise as much as $26 billion in additional capital under government plans unveiled in June. Keystone / Laurent Gillieron

UBS has received a boost in its campaign to water down new capital rules, with Swiss business groups and lawmakers increasingly pushing a compromise amid fears the country risks hobbling its biggest lender and damaging economic growth.

Politicians and lobbyists, including representatives from the centre-right Radical-Liberal Party, the right-wing Swiss People’s Party and the Swiss Bankers Association, are in the early stages of discussing a possible solution under which the Swiss bank would have to raise about $10 billion (CHF8 billion) less than proposed by the federal government, according to two people familiar with the negotiations.

UBS and the finance ministry are not involved in the discussions, they added.

Under government plans unveiled in June, which aim to bolster financial stability after the Credit Suisse collapse, UBS will have to raise as much as $26 billion in additional capital. The bank, which puts the increase in capital needed closer to $24 billion, has branded the proposals “disproportionate” and “out of touch with reality”.

The counterproposal could involve cutting the additional capital burden to $15 billion or even lower, the people with knowledge of the talks said.

If the government pushes ahead with its current proposal, executives and investors have warned that the lender could be forced to relocate its headquarters. Activist Cevian said last month the government’s plans would make Switzerland no longer viable as the UBS’s headquarters.

“There is an increasing feeling among some in the business world and some politicians that with all of the shocks Switzerland is experiencing, the environment has changed. Now is not the time to be hurting the interests of the biggest bank, or making it more susceptible to a foreign takeover,” one of the people with knowledge of the compromise discussions said.

Switzerland is grappling with the highest tariff rates in Europe, imposed by the Trump administration in August. Its central bank has revised economic growth downward for 2026, saying the levies of 39% on everything from chocolate to luxury watches present a “major challenge” for its exporters.

Deadlock

There is also growing frustration in political and business circles at the deadlock between Swiss Finance Minister Karin Keller-Sutter and UBS chief executive Sergio Ermotti, another person said. The strained relationship between the two has become a focal point.

UBS has indicated a willingness to engage, and the bank’s chair Colm Kelleher told local press last week that it wanted a sustainable compromise.

But Ermotti said this week UBS was not in talks with the Swiss government about any potential compromise and the finance ministry has said it will not compromise. The ministry has insisted that the decision on the final rules will remain with parliament – where politicians may yet dilute the proposals – and possibly the Swiss people in a referendum.

“The stand-off has led others in Switzerland to try to bring the two sides together or at least put together a counterproposal that may satisfy both sides,” said one person involved in the plans.

The government opened a formal consultation on the key proposal of its broader banking regulation overhaul last week. In its submission, the SBA lobby group said the measures were “extreme” and “would make it much less attractive to operate international business from Switzerland”.

Lawmakers have become more vocal in recent weeks regarding the need for a compromise. Thomas Aeschi, the head of the Swiss People’s Party, told Swiss national television at the weekend the government needed to find a way to break the deadlock. An American bank buying UBS because it is cheap was “very dangerous”, he said.

The finance ministry declined to comment, noting that the consultation process in Switzerland was ongoing. UBS also declined to comment.

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