Switzerland's upper house approved a proposal that would make UBS hold common equity tier 1 capital equal to 90% of the value of its overseas subsidiaries, rather than the government's tougher 100% blueprint. RBC analysts Anke Reingen, Sherry Lin and Susana Cruz called the decision "close to the worst case" in a Monday note. They peg the earnings hit at 9% versus today's setup, assuming UBS trims its pile of additional tier 1 securities, a junior layer of debt.
UBS has said it will keep fighting the package, arguing the 90% rule would weaken its international competitiveness. The bank had supported a different approach that would have let it meet much of the new requirement using AT1 instruments. Last week, Semafor said UBS has restarted discussions about escaping Swiss oversight, including looking at a potential combination with another major global bank. As RBC put it, "UBS might look into finalizing mitigation plans," adding, "We do not believe selling itself/part of the operations are preferred options - but we don't expect any disclosure to the market before the finalization of rules."
A committee in the lower house takes up the file next, with debate and a possible vote expected during its October and November sittings. After that, the full lower chamber is slated to consider the overhaul, likely in its winter session running from Nov. 30 through Dec. 18. Over the weekend, NZZ reported that some lawmakers floated a softer 75% CET1 backing level.
If the two chambers pass different versions, the plan would shuttle between them until they hammer out a compromise. RBC cautioned that easier rules are unlikely given lower house politics, though the stricter stance in the upper house could speed an eventual agreement.
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RBC's math points to a 9% drag on UBS's per share earnings under the current plan, alongside an estimated need for roughly $16 billion more CET1 capital at its Swiss unit. For investors, that is the mix to watch: profitability pressure, potential balance sheet shifts if AT1 is dialed back, and political risk as the rulebook gets finalized.
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