UBS Lawmakers Float 75% Compromise as Merger Rumors and Capital Fight Converge

Swiss FDP's Hans-Peter Portmann floats a 75% capital backing ratio for UBS's overseas holdings, aiming to bridge the bank and lawmakers.

A middle-ground proposal is taking shape in Bern as Swiss politicians try to defuse a standoff over how much capital UBS must hold against its foreign operations. Hans-Peter Portmann, a National Council member from the pro-business FDP, has put forward a 75% backing ratio for the bank's overseas holdings — a figure that could bridge the gap between the lender and lawmakers pushing for far stricter rules.

The idea is gaining traction within Portmann's own ranks. Fellow FDP parliamentarian Marcel Dobler called the threshold workable, while Thomas Matter of the Swiss People's Party signaled he too could get behind a deal — provided the bank gets another hearing before any final decision is locked in. Their intervention follows a turbulent stretch in which reports of merger soundings by top management and speculation about a headquarters move rattled the political establishment.

The Numbers Behind the Standoff

At the heart of the dispute is the cost of tougher capital treatment. Under a 90% backing requirement passed earlier by the Council of States, UBS reckons it would need roughly USD 16 billion in additional equity. The Federal Council had initially gone further, demanding full 100% coverage. Today's regime is far lighter: foreign subsidiaries must be backed by just 45% hard core capital, or CET1, plus 17% in so-called AT1 bonds. The National Council's economic affairs committee is next in line to review the file.

The bank has not taken the tightening quietly. It warned that Swiss rules — already among the world's strictest — would be pushed to excess if the upper chamber's version survives the remaining legislative stages. In its own position paper, UBS argued for bolstering AT1 instruments and framed the debate around taxpayer protection.

Merger Chatter Meets a Firm Rebuttal

While parliament haggles, a separate storyline has stirred the market. SonntagsBlick reported that at least eight globally active banks have expressed interest in merger talks, naming Morgan Stanley, Deutsche Bank and Standard Chartered among them. According to those accounts, the leadership team around Chairman Colm Kelleher and CEO Sergio Ermotti explored options — a combination or a relocation of headquarters — that might loosen the grip of Swiss regulation. UBS declined to comment on the speculation.

Finance Minister Karin Keller-Sutter poured cold water on the idea. A departure from Switzerland is hardly plausible, she argued, given the substantial costs and heavy legal complexity it would entail. The group's entire business model rests on its Swiss base, she added, which means the regulatory hurdles in question should be manageable for the institution. Her stance found backing from Swiss National Bank President Martin Schlegel, who came out in favor of the most rigorous possible capital backing.

Analysts Keep the Faith

Despite the political headwinds, market watchers are sticking with their constructive calls. JPMorgan reaffirmed its "Overweight" rating on Wednesday with a price target of CHF 50; analyst Kian Abouhossein pointed squarely at the hard line politicians have taken on capital rules, yet still sees the stock as well positioned. Earlier in the week, RBC Capital Markets had already repeated its "Outperform" rating and CHF 44 target, with its analyst focused on shifting scenarios for the bank's foreign subsidiaries.

Meanwhile, UBS continues to clear its legacy issues. On Tuesday the bank reached a settlement with the Dutch public prosecutor's office over a tax matter stemming from former Credit Suisse activities. For EUR 5 million, it resolved allegations concerning inaccurate statements by former clients, without admitting criminal liability.

The shares have responded to the mixed flow of news. UBS closed Friday at EUR 43.59, a gain of 2.3% on the day. The stock now trades 7.7% above its 200-day moving average of EUR 40.46, keeping its broader uptrend intact — though it remains 9.5% below its 52-week high. For investors, the parliamentary process remains the key unknown, tying up management attention and raising questions about future room for shareholder payouts.