UBS faces $17 billion extra capital demand after Swiss vote, Goldman Sachs says
Switzerland's upper house backs a 90% compromise plan that largely mirrors the government's original demands, Bloomberg reports
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Switzerland's upper house of parliament voted for a compromise plan on UBS's capital requirements that largely replicates the government's original demands, a setback for the bank, Bloomberg reported. Goldman Sachs estimates the outcome leaves UBS facing $17 billion in additional capital requirements.
Lawmakers had been weighing three options: the government's call for UBS to back its foreign units with capital equal to 100% of their value, a 90% version of that same rule, and a softer compromise that would have let UBS meet half the requirement with AT1 bonds rather than core capital, Reuters reported via Yahoo Finance. The government's full 100% plan had been estimated to require about $20 billion in extra capital, UBS's own calculation put the figure closer to $22 billion, and the softer AT1 compromise had been estimated at $13 billion, according to Reuters and Swissinfo.
UBS Chief Executive Sergio Ermotti and Chairman Colm Kelleher had lobbied lawmakers to avoid the harsher versions of the rule, telling them the 50% AT1 compromise would be painful but manageable, Reuters reported. The push for tighter capital rules follows the 2023 collapse of Credit Suisse, which UBS went on to acquire, according to Global Banking and Finance.
The $17 billion figure marks a materially worse near-term regulatory outcome for UBS than markets had been pricing in during a quiet stretch ahead of the vote, and it adds to the capital constraints the bank must now manage. A Swiss parliamentary committee has signalled that final decisions may not arrive until 2027, leaving the size and timing of the eventual requirement still open even after this vote.