REG-UBS AG UBS statement on regulatory proposals made by the Swiss government

UBS AGAnnouncement

06/06/2025 17:45

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UBS statement on regulatory proposals made by the Swiss government

 

 

UBS (NYSE:UBS) (SWX:UBSN):

Ad hoc announcement pursuant to Article 53 of the SIX Exchange Regulation
Listing Rules

UBS supports in principle most of the regulatory proposals the Swiss Federal
Council published today.(1) However, UBS strongly disagrees with the extreme
increase in capital requirements that has been proposed. These changes would
result in capital requirements that are neither proportionate nor
internationally aligned.

The proposals would require UBS to fully deduct investments in foreign
subsidiaries from its CET1 capital. UBS would also need to fully deduct
deferred tax assets on temporary differences (TD DTAs) and capitalized
software from its CET1 capital. Furthermore, the proposals would necessitate
an increase in prudential valuation adjustments (PVAs).

Based on published financial information from the first quarter of 2025, and
given UBS AG’s target CET1 capital ratio of between 12.5% and 13%, UBS AG
would be required to hold additional estimated CET1 capital of around USD 24bn
on a pro-forma basis, if the recommendations are implemented as proposed. This
includes around USD 23bn related to the full deduction of UBS AG’s
investments in foreign subsidiaries. These pro-forma figures also reflect
previously announced expected capital repatriations of around USD 5bn.

The incremental CET1 capital of around USD 24bn required at UBS AG would
result in a CET1 capital ratio at the UBS Group AG (consolidated) level of
around 19%. At Group level, the proposed measures related to TD DTAs,
capitalized software and PVAs would eliminate capital recognition for these
items in a manner misaligned with international standards. This would reduce
the CET1 capital ratio at UBS Group to around 17%, underrepresenting UBS’s
capital strength. Further information is available at
www.ubs.com/presentations
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.ubs.com%2Fpresentations&esheet=54268765&newsitemid=20250606036899&lan=en-US&anchor=www.ubs.com%2Fpresentations&index=1&md5=99eba6793d50f453382e733440821409)
.

The additional capital of USD 24bn would be in addition to the previously
communicated incremental capital of around USD 18bn UBS will have to hold as a
result of the acquisition of Credit Suisse in order to meet existing
regulations. This includes about USD 9bn to remove the regulatory concessions
granted to Credit Suisse and around USD 9bn to meet the current progressive
requirements due to the enlarged size of the combined business.

As a result, UBS would be required to hold about USD 42bn in additional CET1
capital in total.

As none of the regulatory changes are expected to become effective before
2027, UBS Group AG maintains its target of achieving an underlying return on
CET1 capital of around 15% and an underlying cost/income ratio of <70% by
the end of 2026 (both on an exit rate basis). UBS will provide an update on
its longer-term returns targets when there is more clarity on the timing of
potential changes and when the likely final outcome becomes more visible.
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 ( 1 ) The proposals are available on the website of the Swiss government at                                                                                                                                                                                                    
 www.admin.ch                                                                                                                                                                                                                                                                   
 (https://cts.businesswire.com/ct/CT?id=smartlink&url=https%3A%2F%2Fwww.news.admin.ch%2Fen%2Fnewnsb%2Fty6FlsBuspE-AXC9ClLJt&esheet=54268765&newsitemid=20250606036899&lan=en-US&anchor=www.admin.ch&index=2&md5=5653ded12d8c3a014419e580e3ea6ff5)                               
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UBS also reaffirms its capital return intentions for 2025. These include
accruing for an increase of around 10% in the ordinary dividend per share and
repurchasing up to USD 2bn of shares in the second half of the year, for a
total of up to USD 3bn. This plan continues to be subject to UBS Group
maintaining a CET1 capital ratio target of around 14% and achieving its
financial targets and is consistent with UBS’s previously communicated plans
and conservative approach. UBS will communicate its 2026 capital returns
ambitions with its fourth quarter and full-year financial results for 2025.

UBS will actively engage in the consultation process with all relevant
stakeholders and contribute to evaluating alternatives and effective solutions
that lead to regulatory change proposals with a reasonable cost/benefit
outcome. UBS will also evaluate appropriate measures, if and where possible,
to address the negative effects that extreme regulations would have on its
shareholders.

As the largest truly global wealth manager and leading bank in Switzerland,
with competitive global investment bank and asset management capabilities, UBS
brings financial stability, expertise, economic benefits and international
know-how to its home country and to all its clients globally. UBS remains
committed to its diversified business model and its unique regional footprint
as well as successfully completing the integration of Credit Suisse in the
best interest of all stakeholders.

UBS is reviewing the substantial amount of information published today and
will share its further assessment in due course.

Cautionary Statement Regarding Forward-Looking Statements

This news release contains statements that constitute “forward-looking
statements,” including but not limited to management’s outlook for UBS’s
financial performance, statements relating to the anticipated effect of
transactions and strategic initiatives on UBS’s business and future
development and goals or intentions to achieve climate, sustainability and
other social objectives. While these forward-looking statements represent
UBS’s judgments, expectations and objectives concerning the matters
described, a number of risks, uncertainties and other important factors could
cause actual developments and results to differ materially from UBS’s
expectations. In particular, the global economy may suffer significant adverse
effects from increasing political tensions between world powers, changes to
international trade policies, including those related to tariffs and trade
barriers, and ongoing conflicts in the Middle East, as well as the continuing
Russia–Ukraine war. UBS’s acquisition of the Credit Suisse Group has
materially changed its outlook and strategic direction and introduced new
operational challenges. The integration of the Credit Suisse entities into the
UBS structure is expected to continue through 2026 and presents significant
operational and execution risk, including the risks that UBS may be unable to
achieve the cost reductions and business benefits contemplated by the
transaction, that it may incur higher costs to execute the integration of
Credit Suisse and that the acquired business may have greater risks or
liabilities than expected. Following the failure of Credit Suisse, Switzerland
is considering significant changes to its capital, resolution and regulatory
regime, which, if proposed and adopted, may significantly increase our capital
requirements or impose other costs on UBS. These factors create greater
uncertainty about forward-looking statements. Other factors that may affect
UBS’s performance and ability to achieve its plans, outlook and other
objectives also include, but are not limited to: (i) the degree to which UBS
is successful in the execution of its strategic plans, including its cost
reduction and efficiency initiatives and its ability to manage its levels of
risk-weighted assets (RWA) and leverage ratio denominator (LRD), liquidity
coverage ratio and other financial resources, including changes in RWA assets
and liabilities arising from higher market volatility and the size of the
combined Group; (ii) the degree to which UBS is successful in implementing
changes to its businesses to meet changing market, regulatory and other
conditions; (iii) inflation and interest rate volatility in major markets;
(iv) developments in the macroeconomic climate and in the markets in which UBS
operates or to which it is exposed, including movements in securities prices
or liquidity, credit spreads, currency exchange rates, residential and
commercial real estate markets, general economic conditions, and changes to
national trade policies on the financial position or creditworthiness of
UBS’s clients and counterparties, as well as on client sentiment and levels
of activity; (v) changes in the availability of capital and funding, including
any adverse changes in UBS’s credit spreads and credit ratings of UBS, as
well as availability and cost of funding to meet requirements for debt
eligible for total loss-absorbing capacity (TLAC); (vi) changes in central
bank policies or the implementation of financial legislation and regulation in
Switzerland, the US, the UK, the EU and other financial centers that have
imposed, or resulted in, or may do so in the future, more stringent or
entity-specific capital, TLAC, leverage ratio, net stable funding ratio,
liquidity and funding requirements, heightened operational resilience
requirements, incremental tax requirements, additional levies, limitations on
permitted activities, constraints on remuneration, constraints on transfers of
capital and liquidity and sharing of operational costs across the Group or
other measures, and the effect these will or would have on UBS’s business
activities; (vii) UBS’s ability to successfully implement resolvability and
related regulatory requirements and the potential need to make further changes
to the legal structure or booking model of UBS in response to legal and
regulatory requirements and any additional requirements due to its acquisition
of the Credit Suisse Group, or other developments; (viii) UBS’s ability to
maintain and improve its systems and controls for complying with sanctions in
a timely manner and for the detection and prevention of money laundering to
meet evolving regulatory requirements and expectations, in particular in the
current geopolitical turmoil; (ix) the uncertainty arising from domestic
stresses in certain major economies; (x) changes in UBS’s competitive
position, including whether differences in regulatory capital and other
requirements among the major financial centers adversely affect UBS’s
ability to compete in certain lines of business; (xi) changes in the standards
of conduct applicable to its businesses that may result from new regulations
or new enforcement of existing standards, including measures to impose new and
enhanced duties when interacting with customers and in the execution and
handling of customer transactions; (xii) the liability to which UBS may be
exposed, or possible constraints or sanctions that regulatory authorities
might impose on UBS, due to litigation, contractual claims and regulatory
investigations, including the potential for disqualification from certain
businesses, potentially large fines or monetary penalties, or the loss of
licenses or privileges as a result of regulatory or other governmental
sanctions, as well as the effect that litigation, regulatory and similar
matters have on the operational risk component of its RWA; (xiii) UBS’s
ability to retain and attract the employees necessary to generate revenues and
to manage, support and control its businesses, which may be affected by
competitive factors; (xiv) changes in accounting or tax standards or policies,
and determinations or interpretations affecting the recognition of gain or
loss, the valuation of goodwill, the recognition of deferred tax assets and
other matters; (xv) UBS’s ability to implement new technologies and business
methods, including digital services, artificial intelligence and other
technologies, and ability to successfully compete with both existing and new
financial service providers, some of which may not be regulated to the same
extent; (xvi) limitations on the effectiveness of UBS’s internal processes
for risk management, risk control, measurement and modeling, and of financial
models generally; (xvii) the occurrence of operational failures, such as
fraud, misconduct, unauthorized trading, financial crime, cyberattacks, data
leakage and systems failures, the risk of which is increased with persistently
high levels of cyberattack threats; (xviii) restrictions on the ability of UBS
Group AG, UBS AG and regulated subsidiaries of UBS AG to make payments or
distributions, including due to restrictions on the ability of its
subsidiaries to make loans or distributions, directly or indirectly, or, in
the case of financial difficulties, due to the exercise by FINMA or the
regulators of UBS’s operations in other countries of their broad statutory
powers in relation to protective measures, restructuring and liquidation
proceedings; (xix) the degree to which changes in regulation, capital or legal
structure, financial results or other factors may affect UBS’s ability to
maintain its stated capital return objective; (xx) uncertainty over the scope
of actions that may be required by UBS, governments and others for UBS to
achieve goals relating to climate, environmental and social matters, as well
as the evolving nature of underlying science and industry and the possibility
of conflict between different governmental standards and regulatory regimes;
(xxi) the ability of UBS to access capital markets; (xxii) the ability of UBS
to successfully recover from a disaster or other business continuity problem
due to a hurricane, flood, earthquake, terrorist attack, war, conflict,
pandemic, security breach, cyberattack, power loss, telecommunications failure
or other natural or man-made event; and (xxiii) the effect that these or other
factors or unanticipated events, including media reports and speculations, may
have on its reputation and the additional consequences that this may have on
its business and performance. The sequence in which the factors above are
presented is not indicative of their likelihood of occurrence or the potential
magnitude of their consequences. UBS’s business and financial performance
could be affected by other factors identified in its past and future filings
and reports, including those filed with the US Securities and Exchange
Commission (the SEC). More detailed information about those factors is set
forth in documents furnished by UBS and filings made by UBS with the SEC,
including the UBS Group AG and UBS AG Annual Reports on Form 20-F for the year
ended 31 December 2024. UBS is not under any obligation to (and expressly
disclaims any obligation to) update or alter its forward-looking statements,
whether as a result of new information, future events, or otherwise.

UBS Group AG and UBS AG

Investor contact

Switzerland: +41-44-234 41 00

Americas: +1 212 882 57 34

Media contact

Switzerland: +41-44-234 85 00

UK: +44-207-567 47 14

Americas:+1-212-882 58 58

APAC: +852-297-1 82 00

www.ubs.com/media
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