Swiss banking biggie UBS, hammered by the Guy Parmelin government’s new capital rule proposals, is considering contingency plans that include relocating its headquarters abroad.
UBS is also mulling acquiring smaller US banks or merging with another lender if Switzerland introduces banking regulations it considers excessively restrictive, stated a Reuters report.
The Swiss banking giant has reportedly assembled an internal executive group to examine possible scenarios as lawmakers prepare to debate tougher capital requirements introduced in response to the 2023 collapse of Credit Suisse.
“No active merger or acquisition discussions are underway,” sources cited by Reuters claimed.
A lower house parliamentary committee is expected to begin debating the proposals later this month.
UBS has repeatedly warned that the proposed rules could undermine its international competitiveness and has signaled that excessively stringent requirements could force it to reconsider its future in Switzerland.
The possibility of UBS moving its headquarters to London has also resurfaced.
The Financial Times reported on Friday that the British government and the Swiss major discussed a potential relocation this year.
UBS has also been expanding its ambitions in the United States, obtaining a US banking licence in March.
Its internal planning reportedly includes identifying smaller American banks it could potentially acquire.
A theoretical merger with Morgan Stanley has also emerged as a possible scenario, according to people familiar with UBS’s thinking.
The two institutions have notable leadership connections: UBS Chairman Colm Kelleher spent much of his career at Morgan Stanley, eventually rising to one of its senior leadership positions.
However, UBS has consistently maintained that it has no plans to leave Switzerland and values its home base.
At the center of the dispute is a Swiss government proposal requiring UBS to fully capitalise its foreign subsidiaries with Common Equity Tier 1 (CET1) capital. The requirement could tie up more than USD 20 billion, according to the bank’s internal estimates.
Last month, the Swiss parliament’s upper house reduced the proposed requirement to 90% CET1 capital.
UBS nevertheless considers the revised threshold excessively high.
Under existing rules, the bank must capitalise its foreign units at 60%, with part of that requirement met through less expensive forms of capital.
The Parmelin government argues that tighter safeguards are necessary to protect taxpayers from potential losses, particularly given UBS’s substantial international operations following its takeover of Credit Suisse.
UBS’s leadership has increasingly emphasised the potential consequences of the proposed rules.
Kelleher said last month that the bank might have to reconsider its future in Switzerland if the incoming requirements proved too harsh.
Sources said that UBS also has a responsibility to shareholders to examine all available options, even if relocation or a merger remains hypothetical.
Swiss Finance Minister Karin Keller-Sutter, who has championed the regulatory overhaul, said last month that she considered a UBS departure unlikely, citing the financial costs and legal complexities involved.