Exclusive-UBS steps up contingency planning as it tries to tame Swiss rules, sources say

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6 days ago

By Oliver Hirt, Ariane Luthi and Julie Zhu
ZURICH/HONG KONG (Reuters) -UBS is briefing senior staff that the need to examine moving its HQ from Switzerland has grown since the government proposed new capital rules, a source with knowledge of the matter said, while another pointed to London as a favourite alternative.
The Swiss government proposed reform measures in June that envisage that UBS - as Switzerland's sole remaining global bank with a balance sheet about double the size of the economy - should capitalise its foreign subsidiaries by 100% rather than 60% currently, to cover potential losses abroad.
That could mean the bank has to carry an extra $24 billion in capital.
A review by UBS looking at contingency planning has concluded that London is one of the best options for an alternative location should the bank try and move, one of the sources said.
Britain has similar rules on foreign subsidiaries but a third source said authorities outside Switzerland may show more flexibility.
Two sources familiar with the bank's thinking said UBS was also warning internally that it could be vulnerable to a future takeover by a foreign rival if it were weakened by the rules.
The sources spoke on condition of anonymity because the discussions are confidential.
UBS, which is due to release second quarter earnings on Wednesday, has intensified lobbying with parliament since June 6 to push back against the proposed capital changes, two lawmakers said.
Even insiders at the Zurich-based wealth manager say UBS - whose leadership argues it came to the rescue when it bought Credit Suisse in a government-engineered deal - does not intend to leave Switzerland. All agree that UBS's principal objective is to soften the regulations.
Even so, UBS executives think the government's demands mean that if no compromise is reached, it may need to respond radically, one source familiar with the lender's thinking said, pointing to a possible relocation.
UBS told Reuters it would engage in the consultation process for the new rules while evaluating appropriate measures "to address the negative effects that extreme regulations would have on its shareholders."
Its Swissness was a "differentiating element", it said, adding that UBS - which has been running an advertising campaign themed "A bank like Switzerland" - wanted to be based in Switzerland "leveraging the mutually beneficial relationship."
Switzerland's finance ministry declined to comment on what it said were internal UBS decisions. FINMA, the Swiss regulator, declined to comment.
UBS earlier this year started warning about the possibility of shifting its headquarters, but the latest deliberations are reported here for the first time and highlight a political tug-of-war between UBS, led by CEO Sergio Ermotti, and the government about what is best for the bank and for Switzerland.
Representatives for the UK Treasury, Bank of England and the Financial Conduct Authority declined to comment.
Swiss Finance Minister Karin Keller-Sutter said in June that the new rules would make it more costly for the bank to grow abroad but that she hoped UBS would stay in Switzerland.
DIFFICULT MOVE
As for any large bank, relocation would be costly and difficult and industry insiders say Switzerland's global renown as a wealth management centre has been central to UBS' business model.
Pressure is, however, growing on the bank.
UBS's shares have underperformed rivals, gaining 7% in 2025 against the wider sector's 37% as investors fear the new rules will impede shareholder payouts and growth prospects.
One UBS shareholder, speaking on condition of anonymity, told Reuters it would be difficult for the bank to attract investors if the capital rules talks dragged on for three or four years without the bank making progress in softening them. The ball "is in UBS's court" to find a solution, the investor said.
Under the proposed capital requirements, UBS's Common Equity Tier 1 capital ratio, a key measure of bank capital, of 14.3% could reach 17%. That would put it above rivals like JPMorgan at 15.8%, Morgan Stanley at 15.7%, and Goldman Sachs at 15.3%, the government estimated in June. Outside experts say like-for-like comparisons are difficult.
PERSUADING INVESTORS
Switzerland's parliament is not due to receive a draft law on the rules until well into 2026. But UBS executives want to reassure investors by early 2026 they can soften the final legislation, two of the sources said.
If it cannot placate investors coming into 2026, UBS may try to repatriate more than the $5 billion in capital it already plans to return to its parent bank, which could eventually fund payouts, analysts say.
UBS's efforts have already yielded fruit. Last month a parliamentary committee backed a motion to make the government send all the new banking rules to parliament instead of issuing some directly.
"We have to find the right balance between capital that minimises risks but also maintains UBS's competitiveness," said Beat Walti, the lawmaker who proposed the amendment.
(Additional reporting by Dave Graham, Lananh Nguyen and Stefania Spezzati; Editing by Tommy Reggiori Wilkes and Susan Fenton)