UBS said to face $20 billion capital hit
UBS Group AG faces an increase in regulatory capital requirements that could reach around $20 billion under reforms proposed in the wake of the collapse of Credit Suisse.
Swiss finance minister Karin Keller-Sutter is aiming for systematically important lenders to have full capital backing against their foreign units, according to a person familiar with the matter. For UBS, the changes would likely translate into a capital hit in the middle of the $15 billion to $25 billion range that analysts and media have estimated, the person said, asking not to be identified discussing internal deliberasystemically tions.
A spokesperson for UBS— which reported common equity tier 1 capital of $79 billion at the end of 2023— declined to comment.
The Federal Council wants important Swiss banks to hold significantly more capital against their foreign units, while bank-specific capital levels should be boosted to take future risks more into account. The proposals would see UBS face a “substantial” increase in regulatory capital requirements, the government said last week.
“Under the currently applicable requirements, the UBS parent bank must provide 60% capital backing for participations in a foreign subsidiary,” the government said when it unveiled its proposal. “The Federal Council is aiming for a significant increase in this capital backing,” leading to a substantial increase in overall requirements, it said.
Swiss newspaper Handelszeitung
has reported the possibility of a $25 billion hit while Autonomous Research analyst Stef Stalmann has said that additional capital requirements in the $10 billion to $15 billion range could dent expectations for share buybacks.
At the end of 2023, UBS’s CET1 ratio, a key measure of financial strength, was 14.5% and its CET1 leverage ratio was 4.7%. Both were above its guidance of about 14% and more than 4.0% respectively.
Keller-Sutter told TagesAnzeiger that a hit in the range of $15 billion to $25 billion was “plausible.” Regardless of the nominal sum, she prefers a backing for foreign subsidiaries that’s closer to 100%, the person said.