FINANCIALS: UBS Article: Swiss Politics Likely Supportive To Spreads

UBS (UBS: A3 dev/A-/A) article in FT citing the political battle between UBS and the Swiss establishment over regulation post-the CS rescue. We don’t see the Swiss backing down, either on overseas subs or FRTB, which should be supportive to UBS spreads, in our view.

• UBS and the Swiss authorities worked closely together on the rescue of Credit Suisse (in Mar-23) but, since then, relations appear to have soured. This appears largely driven by the Swiss establishment looking to prevent any recurrence and deal with an enlarged bank that may be both too big to save and too big to fail (UBS’s total assets are >2x Swiss GDP).
• As part of this, the Swiss have proposed increasing capital requirements for banks (relating to overseas subsidiaries), which we estimated could be USD15-25bn uplift for UBS, consuming meaningfully all of its surplus capital.
• The article largely focusses on the changed personalities since the rescue andthe politics of the situation but doesn’t add much more hard information. Separately, it would seem FRTB implementation will also happen on time (Jan-25), in contrast to US and EU regulators which highlights the hard line the Swiss are taking with banking right now.