Shares of UBS Group AG rose by 5% on the Swiss stock exchange after the Swiss government published a detailed legislative framework clarifying proposed banking reforms. These measures could require the bank to raise up to $26 billion in new capital, easing uncertainty over UBS’s capital requirements.
The most significant change proposed requires UBS to increase the capital held against its foreign units from 60% to 100%, potentially necessitating an additional $23 billion for its main Swiss-based unit. Additionally, the reforms suggest a potential reduction of $8 billion in the use of convertible debt as capital.
Despite these new demands, the government assured that UBS should still be able to pay dividends and pursue organic growth, provided adequate transition periods are implemented, and profitability remains strong. While the bank might temporarily scale back share buybacks and experience a slight dip in return on equity, it would also benefit from reduced risk exposure.
UBS Chairman Colm Kelleher reaffirmed in early April the bank’s commitment to a $3 billion share buyback program in 2025, even amid imminent regulatory changes and broader economic uncertainties.
The market’s positive reaction reflects investor confidence in the bank’s ability to maintain its shareholder remuneration policy despite the new requirements. The clarity provided by the government on the regulatory framework has given the market a better understanding of UBS’s operating environment, boosting optimism about its future performance.