Swiss Finance Minister says leaving would cost UBS more than staying
UBS executives and their advisers are mapping out scenarios under which the bank, Switzerland’s last remaining flagship global lender, would be run from a headquarters outside Zurich, according to people familiar with the bank’s efforts. The planning is a direct response to proposed legislation tightening capital rules under the country’s too-big-to-fail framework, a regulatory regime written after UBS needed a bailout of more than $50 billion following its exposure to toxic U.S. mortgages in 2008.
The proposed measures are a response to UBS having had to rescue Credit Suisse three years ago. Swiss lawmakers say the tougher measures are needed to guard against a banking collapse that could trigger a sovereign crisis; the existing rules were not fully enforced and proved of little help when Credit Suisse was heading toward its 2023 collapse. The combination of the two large lenders has revived fears that Switzerland could face further bailouts. UBS holds about $1.7 trillion in assets, roughly 150% of Swiss economic output, compared with about 15% of U.S. gross domestic product for the largest American bank.
Under the legislation, which still requires parliamentary approval expected in the coming months, UBS would have seven years to phase in the higher capital requirements. The bank has estimated the increase would cost around $16 billion. Polls in Switzerland show public support for the higher capital rules.
Three structural options have been under discussion, according to people familiar with the matter. UBS could acquire a U.S.-based financial institution and relocate its headquarters; it could merge with a European rival; or it could sell itself to a U.S. firm seeking its well-heeled clientele. UBS has received approaches from potential U.S. partners about possible deals, some of the people said, cautioning that the bank is not in active talks and has not taken any formal steps toward a deal.
There are no guarantees UBS will proceed with any transaction. Some people have suggested the bank is posturing in a last-ditch effort to persuade lawmakers to alter their plans, while others note UBS could simply decide to stay. Analysts have cited Morgan Stanley and U.S. regional banks as potential partners; in 2019, The Wall Street Journal reported that UBS and Deutsche Bank had explored ways to combine their businesses. Any deal likely would have to bring in more U.S. wealth clients, or provide new ways to reach them, people close to UBS said.
Finance Minister Keller-Sutter, who has led the push to impose the higher capital requirements, said the cost of leaving would exceed the cost of staying. Stefan Legge, a professor and head of tax and trade policy at the University of St. Gallen, described the confrontation as a standoff between competing visions of the bank. “UBS wants to be a global bank, and people in Switzerland would like it to be the local player for the mom-and-pop shop, and be the local savings bank,” Legge said. “We are watching a game of chicken. Who chickens out first?” “Firms are like plants,” he said. “You can take them and plant them somewhere else, but will they grow there?”
Colm Kelleher, the former Morgan Stanley president who has chaired UBS’s board since 2022, is increasingly in favor of exploring a deal, some of the people said. His mandate when he joined was to scale up UBS in the United States and increase its value in the eyes of bank investors. One of the people likened Kelleher’s strategy to playing hard-nosed poker with Swiss authorities rather than simply bluffing. A person familiar with the bank’s thinking said the chairman and chief executive are fully aligned on the issue.
A departure would be a bitter outcome for Sergio Ermotti, the chief executive. A Swiss national, he returned to UBS in 2023 to guide the bank through the emergency purchase of Credit Suisse, speaking of a sense of national duty in accepting the role. Faced with the government’s determination to raise capital requirements, he has softened his stance on the importance of maintaining a Swiss financial champion, the people said. Both men have said they want to keep running a global UBS from Switzerland but that there might come a point when that is not possible.
Two outside shareholders, Cevian Capital and Artisan Partners, are pushing for a move. Even if UBS relocates its headquarters, the bank could retain its domestic Swiss business or potentially spin it off to shareholders or outside investors. UBS does not break down the overall size of its Swiss business, but in its lobbying materials it said it lends about $417 billion to Swiss companies and households and generates around one-third of its revenue in the country.
UBS traces its history to 1862 and briefly became the world’s second-largest bank by assets when Union Bank of Switzerland and Swiss Bank Corporation merged in 1998 to form the modern institution. The bank bills itself as the bank for billionaires and serves hundreds of thousands of American millionaires; it is the largest wealth manager in Asia and a significant force in the Middle East and other growing wealth markets. In the United States, it is best known for its wealth business, which includes the former PaineWebber adviser network, and for an investment bank that ranks among the top ten and trades equities and advises companies on stock and bond deals.
UBS shares are up this year but have lagged behind their international peers, a factor investors attribute to the debate over capital. The bank has a market value of about $155 billion, below American rivals Morgan Stanley, at about $280 billion, and Goldman Sachs, at about $260 billion. Analysts have cautioned that UBS must also consider how U.S. banking regulation might evolve over time.
The possible departure of UBS has plunged Switzerland into its latest existential crisis over how much it wants finance to define its economic identity. A move from Zurich would diminish the Swiss-ness of a bank that serves as the country’s financial standard-bearer. Switzerland’s cultural identity is wrapped up in its historic role as a place that provides discretion and a haven for the wealth of the global elite. The country’s household wealth, among the highest in the world, is bolstered by the presence of some of the world’s largest companies, whose homegrown champions reinforce its image as a nation of just nine million people that punches above its weight in global markets.