Goldman Sachs analysts, in a note led by Chris Hallam, say the latest proposal would force UBS to hold about $17 billion of extra equity beyond its current requirement. UBS already holds more Common Equity Tier 1 capital than Switzerland's legal minimum, but Goldman Sachs calculates a roughly $7 billion shortfall at second-quarter capital levels. The Goldman Sachs note was published after Wednesday's vote in the Swiss upper house.
The Swiss finance ministry initially proposed 100% backing of foreign subsidiaries, while lawmakers also floated a cheaper AT1 compromise that would have been less strict than the current outcome. UBS had publicly preferred the AT1 option and warned in a position paper Monday that the 90% approach would "significantly damage" its competitiveness. "This is a more onerous outcome compared with the compromises that had recently been discussed in parliament," said Chris Hallam and colleagues.
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Equity analysts at Citi, led by Andrew Coombs, said they worry about "the uncertainty the legislation brings to the future UBS business model, especially for the international investment banking entities." UBS shares rose 0.4% as of 12:32 p.m. in Zurich, even as the lender has not matched broader European banking share gains. The final outcome could be referred to a public vote and a definitive decision on UBS's capital requirements is unlikely before 2027 at the earliest. The article included an image or chart credited as Source: Bloomberg.
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