UBS Group Shares Rise on Swiss Regulators' Capital-Rule Relaxation

Shares of UBS Group AG UBS rose nearly 5.4% following reports that the Swiss government is preparing to soften part of its June 2025 banking regulation package that could have required UBS to add as much as $24 billion in additional capital, according to an MSN article, which cited a Reuters report.

The planned easing focuses on rules related to the valuation of deferred tax assets (DTAs) and software assets, which account for nearly $11 billion of the total additional capital UBS might have needed to hold.

Despite the expected adjustments, the government still intends to move forward with a key part of the regulatory requirement, requiring UBS to capitalize its foreign subsidiaries, the largest component of the potential $24 billion capital burden.

Why UBS Faced Heightened Capital Rules

The stricter capital rules were proposed in the aftermath of UBS’s takeover of Credit Suisse, a rescue that reshaped the Swiss banking landscape. In June 2025, the Swiss government unveiled a major “too big to fail” reform package aimed at strengthening the country’s regulatory framework. Regulators had demanded the bank hold significantly more capital to buffer against future systemic risks.  

The initial plan required UBS to fully capitalize all foreign subsidiaries, up from the historical 60% threshold, while also mandating deductions of DTAs and software from common equity tier 1 (CET1) capital, higher prudential valuation adjustments, and reduced reliance on additional tier 1 (AT1) bond holdings. Initial estimates indicated that UBS might need around $26 billion in additional core capital.

The company opposed the proposal, stating that additional capital requirements might hinder its ability to return cash to shareholders via dividends or share buybacks.The bank estimated that the reforms would effectively force about $42 billion in additional capital, which includes $18 billion already needed under old rules (post-Credit Suisse acquisition) plus $24 billion from the new June proposals.

What Soften Capital Rules Mean for UBS

As the Swiss government softens the requirements for valuing DTAs and software, UBS could see its incremental capital burden reduced by up to $11 billion, a substantial portion of the earlier projected capital hit.  

With lesser capital tied up for regulatory compliance, UBS will have more flexibility to resume capital returns such as dividends or share buybacks, invest in growth areas, or reallocate resources, all of which were under pressure under the stricter regime.

However, the most significant component of the proposed reforms, which requires UBS to fully capitalize its foreign subsidiaries, is still pending approval. If that requirement persists, UBS could still face a substantial capital increase, offsetting much of the relief from the softened measures.

UBS’ Zacks Rank & Price Performance

Over the past six months, UBS shares have gained 24.5% compared with the industry’s growth of 20.4%.

Currently, the company carries a Zacks Rank #3 (Hold).

UBS’ Peers Worth Considering

A couple of better-ranked peer stocks are Deutsche Bank Aktiengesellschaft DB and The Bank of N.T. Butterfield & Son Limited NTB. Each stock presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings estimates for DB for the current year have been revised 2.8% upward over the past 30 days. Over the past six months, DB shares have soared 31.3%.

NTB’s current fiscal-year earnings estimates have remained unchanged over the past month. Shares of NTB have gained 13% over the past six months.

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This article originally published on Zacks Investment Research (zacks.com).

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