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Key Takeaways

• UBS Group gained approximately 4.72% as the Swiss government softened banking regulations.
• UBS Group avoided a major capital raise after Swiss regulatory changes spared the bank $11 billion in capital.

UBS Group AG saw a 4% spike in its stock price on Friday after news broke that the Swiss government has begun preparing to soften parts of a proposed banking regulation package. The changes could significantly reduce the bank’s potential need for additional capital. Shares of UBS closed at $40.64, marking a 4.72% gain on the day.
 

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The regulatory overhaul had initially threatened to require UBS Group to raise up to $24 billion in additional capital, which the bank warned could harm its operations. With the government signaling changes to the proposed rules, UBS Group appears poised for a reprieve.

Swiss Government to Ease Certain Regulations

According to sources familiar with the situation, the Swiss government plans to adjust certain aspects of the proposed regulations. The adjustments would primarily impact the valuation of deferred tax assets and software, which together accounted for approximately $11 billion of the capital requirement. By softening these rules, UBS Group could avoid much of the capital burden.

Although these changes are a significant relief for the bank, the government is expected to maintain a key aspect of the regulation. UBS Group will still be required to fully capitalize its foreign subsidiaries in Switzerland, which would represent the largest portion of the $24 billion requirement. The government’s decision is seen as a move to balance financial stability with the competitiveness of Swiss banking.

Regulatory Package Faces Political Pressure

The Swiss government’s move to amend the regulation comes amid increasing political pressure. Lawmakers, industry groups, and cantonal governments have joined UBS Group in voicing concerns that the proposed rules could undermine Switzerland’s status as a global financial hub. These regulations have already sparked significant debate within the political landscape.

Several influential lawmakers have expressed their opposition to the rules, urging the government not to exceed international standards.  A compromise solution is expected, with lawmakers keen to strike a balance between regulation and competitiveness.

As UBS Group continues to advocate for a dilution of the rules, it is clear that the political and regulatory environment will play a critical role in shaping the future of Swiss banking. The government has yet to finalize its decision, with an official proposal expected in the coming months. The adjustments to the regulations would go into effect by 2027, with further decisions to follow in 2028.

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