UBS chief warns Swiss capital rules could threaten its ability to compete

Ermotti has made relocation part of the argument. Speaking to analysts on Wednesday, October 28, UBS’s chief executive said the bank was assessing the long-term consequences of Switzerland’s planned capital rules for its ability to compete from the country. His remarks sharpened a dispute that has grown more consequential since a vote last month reduced UBS’s hopes of winning changes to the government’s proposal. The plan could require the bank to hold $16 billion in additional capital. Ermotti said clients value Switzerland, but argued that the country’s reputation alone cannot secure the bank’s position in international markets. He stopped short of saying a move was imminent, describing the issue as one with long-term consequences and saying no urgent decision was needed. Still, his public warning puts UBS’s future location squarely into the debate as lawmakers prepare for another round of scrutiny.

The rules are designed to shield UBS’s Swiss entity from risks abroad. Since Credit Suisse collapsed more than three years ago, the Swiss government has sought to make its remaining global bank more resilient in a crisis. A central element is stronger equity backing for UBS’s foreign businesses, so problems in those operations cannot sink the domestic entity. UBS argues the requirements would make it less competitive. The debate has included a 90% core capital ratio for foreign subsidiaries, a measure discussed in parliament in September. The Senate’s Economic Affairs and Taxation Committee said on Wednesday that the need to strengthen capital backing for foreign units was “uncontested”. That agreement on the objective leaves lawmakers to weigh the design and consequences of the rules. The government’s proposal has already survived a vote that dimmed UBS’s hopes of seeing the planned capital increase watered down.

UBS is testing how much its Swiss identity matters to clients. Ermotti called the bank’s Swiss roots an advantage, while saying they were not the reason clients chose UBS. His comments challenge the assumption that a Swiss base alone will keep the bank’s international business anchored in the country. The political stakes are also economic. The Swiss Bank Employees Association wrote to lawmakers this month urging a “viable compromise” and warning that a headquarters relocation could put as many as 12,000 jobs at risk. That possibility could strengthen UBS’s hand as parliament returns to the legislation. Ermotti had previously avoided an explicit threat to leave Switzerland. After meeting lawmakers on Monday, he spoke more directly about assessing the bank’s ability to compete from the country. The prospect of moving would carry costs for UBS, as well as consequences for Switzerland’s financial centre and domestic economy.