UBS Revives Talks of Foreign Merger or Relocation to Avoid Stricter Swiss Capital Rules After Parliamentary Vote

UBS senior management has resurrected internal discussions about moving the bank out of Switzerland—potentially through a combination with a foreign bank—after lawmakers advanced stringent new capital requirements. The renewed talks, first reported by Semafor, follow a decisive vote by the Swiss parliament's upper house on Wednesday, September 23. Holding excess capital puts the bank at a disadvantage compared to international peers, prompting executives to evaluate extreme contingencies.[2][5]

The Council of States voted 29 to 16 to require UBS to back its foreign subsidiaries with 90 percent Common Equity Tier 1 (CET1) capital. The measure is part of a broader regulatory overhaul designed to prevent a repeat of the 2023 banking crisis that forced UBS to absorb its collapsed rival, Credit Suisse, in a state-engineered rescue.[4][6]

UBS estimates that the 90 percent CET1 threshold would force it to hold approximately $18 billion in additional capital. When combined with other regulatory changes announced earlier this year, the bank stated it could be required to hold up to $33 billion in incremental CET1 capital since the Credit Suisse acquisition, adding roughly $2.5 billion in annual costs.[1][4]

The government had originally proposed a 100 percent CET1 requirement, which would have demanded around $20 billion in new capital. UBS Chief Executive Officer Sergio Ermotti had lobbied heavily for a compromise that would allow the bank to back its foreign units with 50 percent CET1 and 50 percent Additional Tier 1 (AT1) capital—a cheaper form of funding that would have reduced the additional capital burden to roughly $13 billion.[6]

Ermotti publicly rejected the 90 percent requirement as "not a compromise," arguing it fails to address the root causes of the Credit Suisse collapse and distorts the bank's competitive position. "We can live with a black eye, but two black eyes and a broken nose is too much," Ermotti told the Neue Zürcher Zeitung before the vote, warning that the costs would eventually be borne by customers and employees.[3][6]

Swiss Finance Minister Karin Keller-Sutter defended the stringent rules, noting that UBS's balance sheet now exceeds the entire Swiss economy. "Hard equity is the most important lever in any crisis," Keller-Sutter told lawmakers, emphasizing that Switzerland could not handle a potential collapse of its sole remaining globally systemic bank.[4][6]

In response to the legislative setback, UBS leadership is reportedly evaluating potential merger partners, including Morgan Stanley, Standard Chartered, and Deutsche Bank. Analysts note that while cross-border combinations of this scale face massive regulatory hurdles, the leaks serve as a stark warning to lawmakers about the limits of the bank's tolerance for domestic regulation.[2][5]

The capital rules bill now moves to the lower house of parliament for further debate. A final decision on the regulatory framework is not expected until late 2026 or 2027, leaving UBS and Swiss authorities locked in a protracted standoff over the future of the country's financial center.[3][4][6]