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UBS shares have climbed to their highest level in more than 17 years, buoyed by growing investor optimism that Swiss lawmakers will reach a compromise on proposals to impose tougher capital rules on the bank.
The stock has been sensitive for months to debate over the Swiss government’s June 2025 banking reform package, which could require UBS to hold up to $26bn in extra capital.
The bank has been particularly opposed to the proposal to force it to back its foreign subsidiaries with an extra $23bn in capital.
Investor sentiment has been boosted by local press reports of a compromise being proposed by multiple political parties. The multi-party proposal suggests broader political momentum behind a more moderate overhaul of the capital regime.
A group of senior legislators proposed softening the extra capital burden for UBS by allowing it to use additional tier one (AT1) debt — a cheaper form of capital — rather than equity to cover up to half of the capitalisation of its foreign subsidiaries.
Politicians in the FDP party told Swiss newspaper Neue Zürcher Zeitung that they had “constructive conversations” with finance minister Karin Keller-Sutter, who is a member of the party.
UBS shares climbed more than 4 per cent in morning trading in Zurich, pushing the stock to SFr35.17, its highest level since February 2008 before receding slightly.
The Federal Council — the country’s government — is not expected to make a decision on the new capital rules until a formal consultation period on the reforms ends on January 9.
Politicians and lobbyists, including representatives from the FDP and People’s party, have been discussing a compromise solution for months, the Financial Times reported in October.
The latest proposal is that Switzerland should keep very strong capital rules for UBS but that these should be no harsher than necessary and should not be so strict that the bank becomes uncompetitive internationally, according to a copy of the plan seen by the FT.
It recommends aligning several technical rules with those in the EU, UK and the US.
The proposal also envisages UBS capping the size of its investment bank at 30 per cent of its risk-weighted assets. The investment bank already has a self-imposed limit of 25 per cent of UBS’s risk-weighted assets, and the Swiss lender has indicated that it would be willing to make a cap permanent.
UBS said the new proposal “goes in a more constructive direction than the extreme approach proposed by the Federal Council”. It added: “However, Switzerland already has the most stringent capital requirement regime in the world.”
The bank said it would “advocate for a strengthening of the regulatory framework with targeted, proportionate and internationally aligned measures”.
However, some people close to UBS still believe the fresh proposals do not do enough to address the bank’s concerns.
“The signals are more positive than they have been but this is still not going to solve the problem. The proposal still does not address the fact we will be less competitive,” said one person familiar with UBS’s thinking.
The Swiss bank has held discussions about moving its headquarters to the US if the rules are not watered down, the FT reported last month.