Swiss Bank UBS could need to hold between $10-15 billion in excess capital following Switzerland's government's announcement of stricter capital requirements, according to an Autonomous Research forecast.

UBS would require 200 to 300 basis points more in common equity tier 1 ratio (CET1 ratio) – a gauge of a bank's resilience – which "would require the retention of around $10-15 billion incremental CET1 capital in coming years," according to analyst, Stefan Stalmann. 

The requirement to retain this amount could "seriously dent" current expectations for UBS to repurchase its shares, he added.

UBS could encounter an increase of up to 700 basis points for its CET1 ratio, according to Stalmann, in a worse case "headwind." However, he noted that his estimates are somewhat speculative since the Swiss government hasn't provided precise figures on the additional capital required for the expanded UBS, Reuters reports.

According to Stalmann, who he said maintained a neutral rating on UBS stock, remarked that the government's suggestions, integrated into Switzerland's endeavours to protect against a recurrence of Credit Suisse's collapse, would introduce uncertainty.

This is due to the government only aiming to finalise its regulatory plans in the first half of next year, which according to the analyst "is bound to create a lengthy period during which investors, but also UBS itself, will face elevated uncertainty about medium-term capital planning and payout prospects."

After UBS shares surged since the rescue takeover of Credit Suisse last year, they endured a steep decline on Wednesday, and fell a further 2.5% on Thursday, the Reuters report adds.

Earlier this week, Switzerland's finance ministry said its "too big to fail" recommendations involved imposing stricter capital requirements on UBS and other banks deemed systemically important, in response to the bailout of Credit Suisse.



  • UBS,
  • Credit Suisse

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