UBS, Switzerland's leading bank, contemplates a relocation of its headquarters to the United States
In a significant development for the Swiss financial sector, UBS, one of the world's most powerful wealth managers, has warned it might no longer keep its headquarters in Zurich due to new stricter capital requirements in Switzerland.
The proposed rules, aimed at systemically important banks like UBS, could raise UBS's capital needs by as much as $26 billion (€21.9 billion). The new rules would force UBS to fully cover its foreign subsidiaries with capital from the parent bank, equivalent to 100 per cent of the risks taken by its foreign branches.
UBS has described the plan as "punitive and excessive", and the mood inside the company is described as tense, with leaders feeling let down by Swiss politics. The legislative process for the new rules could take years, giving UBS time to press its case.
Rumours have surfaced that senior executives at UBS have met with US officials to discuss a possible relocation to the US, potentially linked to a merger with a local bank. However, UBS has declined to confirm the talks but has not denied them. Names mentioned as possible takeover partners include PNC Financial and Bank of New York.
If UBS were to leave Switzerland, thousands of highly paid jobs could disappear, and smaller businesses, which rely on UBS for credit, might struggle to secure financing. The reputational damage for Switzerland if UBS were to leave would be "immense."
Britain faces its own financial strains, with international investors pulling out of UK equities at the fastest pace in two decades. Analysts blame weak productivity, stubborn inflation, and rising debt for the UK's financial struggles, leaving it something of an outlier in Europe.
Finance minister Karin Keller-Sutter has stated that it is not up to the Federal Council to determine the location of UBS's head office. However, she did acknowledge that if UBS were to pull back from Switzerland, tax revenues for the federal government, cantons, and municipalities would shrink.
The Swiss People's Party has voiced opposition to significantly higher capital demands, leaving the outcome uncertain as parliament begins its debates. Insiders have stated that the debate inside the boardroom is at a critical stage, with one saying it is "two minutes to midnight."
Additional accounting changes could add another $3 billion (€2.5 billion) to UBS's capital needs. Despite these challenges, UBS remains one of the world's leading financial institutions, and any decision it makes will have far-reaching implications for the global financial market.
