Switzerland plans to refine UBS Group AG's capital new regulations or influence the future and headquarters selection of banks.

According to reports, Switzerland is expected to refine stricter capital rules for UBS Group AG (UBS.US) this month, a key step in determining the future direction of the banking giant, which could even affect whether it chooses to continue to keep its headquarters in Switzerland. Since the collapse of Credit Suisse in 2023 and the subsequently government-backed acquisition of UBS Group AG, Switzerland has promised to strengthen its regulation of the last remaining global bank in the country. UBS Group AG has stated that this could force it to increase its capital by an additional $22 billion. According to lawmakers and banking sources, in the draft law expected to be announced in April, the Swiss government is likely to insist on its core requirement that UBS Group AG must fully support its overseas operations with common equity Tier 1 (CET1) capital. UBS Group AG believes that this requirement is overly strict. The government argues that considering the balance sheet of UBS Group AG is about twice the size of the Swiss economy, this capital rule reform is necessary to maintain financial stability. Parliament will be the ultimate decision-maker on the new capital rules and may choose to soften some aspects. However, lawmakers from all parties have indicated that the government is expected to make some concessions to UBS Group AG in terms of regulatory measures directly controlled by the government, determining which assets can be included in core capital. Two sources revealed that without these concessions, the risk of UBS Group AG being acquired would increase, potentially requiring a restart of contingency plans, including relocating its headquarters overseas. UBS Group AG had no comment on this. Chief Investment Officer of Axiom Alternative Investments, David Benamou, said, "If additional capital requirements are added, UBS Group AG will not be able to maintain its attractiveness on par with other banks." He also noted that discussions surrounding UBS Group AG capital have led to its stock price lagging behind competitors. Despite this, the market generally believes that the likelihood of UBS Group AG leaving Switzerland is low. Hans Gersbach, professor of economics at ETH Zurich, said, "In a world where political risks, like those facing GEO Group Inc, are increasing, the 'Swiss identity' will become a more valuable asset in the future." Balancing stability and competitiveness Facing the government's capital proposal, UBS Group AG is actively opposing it, while some lawmakers propose a compromise allowing UBS Group AG to include lower-cost additional Tier 1 capital in the required buffer capital. The government will also introduce regulations expected to take effect in 2027, deciding whether UBS Group AG can still include intangible assets and deferred tax assets in its core capital. The ruling Federal Council had previously suggested that UBS Group AG should fully deduct these assets, which UBS Group AG said would reduce its existing capital by about $11 billion. Lawmakers, states, and business associations are calling for the rules to be consistent with other financial centers. Lawmakers suggest that this may involve allowing UBS Group AG to amortize intangible assets over three years according to EU rules. The rules regarding deferred tax assets may also be adjusted according to international standards, although it is not yet clear what form of relief UBS Group AG will specifically receive. Roman Studer, CEO of the Swiss Bankers Association, said, "It is hard to imagine that the final regulations will not be modified." Analyst Andreas Venditti of Vontobel pointed out in a report to investors in March that if the government directly issues the original draft regulations without a transition period, UBS Group AG's stock price could come under pressure. Erich Ettlin from the centrist party serves as chairman of the parliamentary committee that will start discussions regarding the capital rules of UBS Group AG in early May. He stated that he hopes the regulations will include concession clauses, "otherwise, we will have to make retroactive amendments through legislative action."