UBS faces capital cost increases and US Senate scrutiny

UBS is facing significant regulatory and legal pressures regarding its capital structure and historical liabilities. The bank has expressed opposition to a proposal from the Swiss Council of States Economic Affairs Committee (WAK-S), which suggests that UBS foreign subsidiaries be backed by 50 percent Common Equity Tier 1 (CET1) capital and 50 percent AT1 bonds. UBS estimates this specific requirement would necessitate an additional $13 billion in AT1 capital. When combined with other existing and proposed capital requirements stemming from the Credit Suisse takeover, the bank estimates it may need to build up approximately $30 billion in additional Tier 1 capital.

Simultaneously, UBS is under scrutiny from the US Senate Judiciary Committee concerning an investigation into former Credit Suisse accounts linked to Nazi-era organizations. Senate Committee Chairman Charles Grassley has issued a letter stating that previous responses from the bank were insufficient, prompting 62 additional questions. While UBS maintains that a $1.25 billion settlement in the 1990s covers potential claims and is conducting a voluntary review through 2026, the committee's ombudsman has previously accused the bank of withholding documents. UBS has denied these allegations, noting it has provided over 19 million documents and spent more than $100 million on the investigation to date.