May 2025 marks a moment of great uncertainty for Ubs, a Swiss banking giant who, after Credit Suisse’s emergency acquisition in 2023, is now facing new regulatory challenges that could profoundly change his risk profile.
The UBS case and the tightening of the rules
The acquisition of Credit Suisse by UBS in 2023 was an extraordinary maneuver orchestrated by the Swiss government to avoid one systemic crisis which could have overwhelmed the entire Swiss financial sector and, potentially, European.
On that occasion, Ubs has become the only Swiss bank of global systemic importance (“Too big to fail”), taking on a key role Not only in the national banking system but also in the mechanisms of global financial stability.
But precisely this new centrality has brought with it greater attention from the regulation authoritywhich today fear that an excessive concentration of risks on a single actor can endanger the entire Swiss economic system.
According to what reported by Bloombergthe Swiss Confederation would in fact be evaluating a significant tightening of Minimum capital rules required for UBS, with the aim of strengthening their losses absorption capacity.
In detail, the bill, which should be published in a preliminary form in June, could oblige Ubs to hold up to $ 25 billion in additional capital. Even more relevant, the New rules they could impose on the bank to cover up to 100% of potential losses of its foreign branches, an unprecedented level of coverage for a global bank.
The new legislative proposal is therefore an answer to the lesson learned with the collapse of Credit Suisse: no bank can more afford margins of error. But what does this new imposition entail?
The consequences on actions
A possible increase in property requirements could have significant impacts on UBS’s operational and financial strategy. Setting up to 25 billion dollars of capital means reducing the operating lever and allocating resources which, alternatively, could be used for generate performance: loans, investments, strategic operations or dividends distribution.
In practical terms, this could translate into:
- a decrease in profitability;
- a reduced international growth capacity;
- A potential slowdown in the distribution of dividends or buybacks.
All would penalize The shareholders. As a result, there would also be greater caution in expansion in emerging markets, often more profitable but also more risky.
The risks for UBS investors
For investors, the hypothesis of new thus stringent rules represents a double risk: on the one hand, there is the possibility of a Reduction of returns on investment (ROE), and on the other one perceived increase in risk regulatory. This could have concrete effects on the listing of the UBS shares, which risk losing appeal on the market compared to foreign competitors less subject to constraints.
Furthermore, if the bank should choose to compensate for the effect of the new asset requirements by increasing the level of operational risk (for example, going into areas with greater performance but also more volatile), investors could find themselves exposed to more unstable scenarios.
UBS has not yet made official statements about the proposal, but the CEO Sergio Ermotti has repeatedly expressed the fear that an excess of regulation It may penalize the competitiveness of Switzerland as a global financial square. According to Ermotti, an escape of international investors or institutional customers towards banks of other less restrictive jurisdictions would be a scenario not to be underestimated.
For investors, It will therefore be crucial to monitor The evolution of the regulatory proposal and its parliamentary process, as well as the countermeasures adopted by UBS (cost reductions, capital reallocation, revision of international strategy) and the reactions of the stock market and international analysts, which could review target price and rating on UBS.
