UBS provides update on changes to Switzerland regulatory regime

The company said, “In April 2026, the Swiss Federal Council published its final amendments to the Capital Adequacy Ordinance specifying the regulatory capital treatment of selected assets. Under the amended ordinance, UBS‘s (UBS) capitalized software will be subject to an amortization of a maximum of three years for regulatory capital purposes, irrespective of the actual economic useful life. In addition, prudential valuation adjustments will be revised, resulting in higher capital deductions for assets and liabilities that are subject to valuation uncertainty. The capital treatment of deferred tax assets arising from temporary differences remains unchanged. The amendments to the CAO will become effective on 1 January 2027, except for the revised capital treatment of capitalized software, which will apply from 1 January 2029. Regarding additional tier 1 capital instruments, the Swiss Federal Council has decided not to proceed with the adjustments proposed in June 2025. The Swiss Federal Council also finalized measures that aim to enable the Swiss Financial Market Supervisory Authority and other authorities to better assess the liquidity of banks in a stressed situation. In addition, the Swiss Federal Council submitted to the Swiss Parliament its final proposal for amendments to the Banking Act that govern the capital treatment of systemically important banks’ investments in foreign subsidiaries. This proposal will now be deliberated by the Swiss Parliament. Under the proposal, investments in foreign subsidiaries would be fully deducted from UBS AG’s standalone common equity tier 1 capital. The amendments would be phased in over seven years, with a 65% deduction requirement in the first year and increasing to 100% by 5-percentage-point increments each year. For UBS AG standalone, the amendments at the ordinance level related to capitalized software and prudential valuation adjustments, once fully implemented, are expected to have a net CET1 capital impact of approximately $2B. The proposed full deduction of investments in foreign subsidiaries would require UBS AG standalone to hold additional CET1 capital of around $20B. The total incremental CET1 capital would amount to around $22B required at the UBS AG standalone level. At the Group level, the amendments at ordinance level will lead to a derecognition of around $4B of net CET1 capital. These estimates have been calculated based on UBS Group AG’s consolidated balance sheet as of 31 December 2025, assuming that all capital measures are adopted as currently proposed and using an assumed CET1 capital ratio of 12.5% for UBS AG and 14.0% for UBS Group. The incremental capital requirement of $22B mentioned above would come on top of the $15B of capital required as a result of the Credit Suisse acquisition. This includes around $9B in response to the abolition of regulatory concessions that had been granted to Credit Suisse and around $6B to meet the progressive requirements due to the increased size and higher market share of the combined business. On this basis, UBS would be required to hold around $37B of additional CET1 capital in total.”