UBS in Focus: Capital Requirements for Foreign Units Under Discussion

The future capital requirements of UBS for its foreign units are under review, and the final decision heavily depends on the bank's crisis resilience. Swiss Finance Minister Karin Keller-Sutter emphasized this at an event in Zurich. The experiences with Credit Suisse showed that particularly its US and UK subsidiaries were inadequately capitalized. However, a definitive amount for the capital increase has not yet been determined. The financial regulator Finma has already asked UBS to revise parts of its emergency plan to accommodate the new scale and complexity of the bank following the acquisition of Credit Suisse. The considerations particularly involve the capital allocation to the bank's international units. There is a debate about increasing this from the current 60% to 100%. A proposal to merge institutions to strengthen financial regulation in Switzerland has been rejected by Keller-Sutter. The Swiss government recently introduced a series of reforms in April, identifying lower capital provisions as one of the weaknesses in the case of Credit Suisse. This ultimately prevented a sale of foreign branches in an emergency. Currently, the government and UBS disagree over the planned changes, which could increase the bank's capital requirements by up to 25 billion US dollars. UBS CEO Sergio Ermotti is strongly opposed to this measure, pointing to the already stringent regulatory environment in Switzerland.