by Ariane Luthi and Oliver Hirt

BERNE (Reuters) – The Swiss government proposed on Friday to impose more stringent rules on UBS following the acquisition of Credit Suisse, which could force the bank to hold 26 billion dollars in additional equity and confirms its worst fears.

The main government proposal, for which UBS would have six to eight years to prepare once it has entered into force, provides that the bank must fully capitalize its foreign subsidiaries, in accordance with what many analysts, legislators and executives were waiting.

UBS broke out Friday in deep disagreement with the project, believing in a statement that the increase in funds envisaged – which, according to her, would require her to hold an additional $ 24 billion – was “extreme” and would result in requirements which are “neither proportionate nor aligned internationally”.

The title UBS, lagging behind its European peers for months due to the uncertainties on the new regulation, nevertheless leaps after the announcement of the proposals on Friday afternoon, winning up to 7% and turning to its best performance in one day since May 2024.

The Government said that its proposal for equity requirements would allow UBS to reduce dollars by $ 8 billion its at1 bond. Today, the bank should only capitalize its foreign subsidiaries at 60% and can cover part of the capital with AT1 bonds.

UBS leaders believe that the additional capital burden will disintegrate the Zurich bank compared to its rivals and will harm Swiss competitiveness as a financial center.

UBS saved Credit Switzerland in March 2023 by buying the group for a bite of bread after a series of scandals that shaken the second Swiss bank, arousing numerous calls to strengthen the regulations in order to prevent such a scenario from happening again.

“Targeted and proportionate” measures

While the Swiss Minister of Finance Karin Keller-Sutter is currently occupying the swinging presidency of Switzerland, Friday announcements mark the start of a long period of political debate on new measures, which the Federal Council in power has described as “targeted and proportionate”.

“They are crucial for the stability of the financial sector and therefore for the protection of the economy and taxpayers,” said Karin Keller-Sutter at a press conference.

Depending on the reaction of UBS, capital requirements could be considerably revised, she added.

A parliamentary commission of inquiry noted last year that UBS had a higher assessment than the Swiss economy since the acquisition of Credit Suisse and urged the government to take into account the foreign subsidiaries.

The Federal Council specified that it would present proposals for proposals for consultations with stakeholders during the second half of 2025.

According to officials from the Ministry of Finance, laws requiring the approval of the Parliament will not enter into force before 2028.

Distinct measures known as orders, which can be issued directly by the government, are likely to apply from early 2027.

Transition period

The government said that a six to eight -year -old transition period seemed appropriate to allow UBS to respect the new rules. This would give the bank until the mid -2030s to comply.

Internal sources in UBS have warned that new regulations could make the bank an attractive target for a buyout.

The transfer of its head office outside Switzerland is one of the scenarios envisaged, according to internal sources, but Karin Keller-Sutter said that she hoped that the bank would remain in the country.

“In the end, this is a corporate decision,” she said at the press conference.

According to Swiss proposals, the UBS CE ratio could be slightly higher than that of its global rivals, has admitted the government. It was 14.3%and could reach 17%, which would exceed banks such as JPMorgan (15.8%), Morgan Stanley (15.7%) and Goldman Sachs (15.3%), he said.

Analysts believe that new regulations could lead to a reshuffle of the UBS business model, which is now focusing on growth in the United States and Asia. To alleviate the effects of regulation, the bank may be attempted to sell certain assets, according to banking experts.

(Report by Ariane Luthi and Oliver Hirt, with John Revill, John O’Donnell and Miranda Murray, written by Dave Graham; Benjamin Mallet, edited by Tangi Salaün)

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