UBS Faces $20 Billion Bill for Swiss Capital Hike

Swiss regulators are tightening the guardrails for UBS after the Credit Suisse collapse three years ago. The Swiss National Bank's Vice President Antoine Martin said that UBS must fully back its foreign subsidiaries with high-quality capital held in Switzerland, specifically Common Equity Tier 1 (CET1) capital.

The SNB estimates it would cost UBS around $20 billion to comply with the new rules, which would require a significant increase in CET1 capital. Currently, UBS backs its foreign participations with between 45% and 60% CET1, but regulators want this increased to full coverage of 100%.

Martin acknowledged concerns about competitiveness, pointing out that well-capitalized US banks are able to perform without impairing their ability to lend. The Credit Suisse saga highlighted the risk of contagion when a parent company's capital is insufficient to support its subsidiaries.