UBS Gets First Conditional Approval for US Banking License

UBS Group AG has received the first conditional approval for a national bank charter in the United States. The Swiss bank submitted its application in October to expand wealth management services for US clients. The Office of the Comptroller of the Currency has given initial approval, marking a key step toward final authorization.

UBS emphasized that this milestone supports its growth strategy in the US. The bank has long sought to strengthen its presence in the US wealth management sector, which is a major revenue generator alongside Switzerland. The approval reinforces UBS's ambition to position itself as the leading global wealth manager in the US.

A second, final approval is still pending. According to an insider, the process is expected to conclude this year. Final approval would allow UBS Bank USA to offer a broader range of services, enhancing its ability to compete with other major financial institutions.

Why Did This Happen?

UBS's push for a national bank charter aligns with its strategy to expand its wealth management offerings in the US. The bank has historically faced higher costs in the US compared to other regions. The charter would help streamline operations and reduce regulatory complexities, supporting UBS's growth goals.

The conditional approval reflects the bank's efforts to meet regulatory requirements. UBS has worked closely with US regulators to ensure its compliance with national banking standards. The process involved submitting detailed documentation about its operations and risk management practices.

How Did Markets React?

UBS's CEO, Sergio Ermotti, has been vocal about the Swiss government's proposed banking reforms. Ermotti recently stated that the reforms go 'too far' and could impair UBS's competitiveness. The bank has been advocating for a more balanced regulatory framework to support its global ambitions.

The CEO highlighted the political nature of the Swiss regulatory debate. He expressed hope for more clarity by the second half of the year, as the Swiss government continues to evaluate the proposals. Ermotti also noted the need for a competitive regulatory environment to sustain UBS's long-term growth.

UBS has criticized the Swiss proposals for imposing excessive capital requirements. The bank estimates the new rules could raise its capital needs by up to $26 billion, making it significantly less competitive than its peers. The proposed minimum CET1 ratio of 19% would place UBS well above the industry average of 11.5%.

A compromise proposal backed by the Swiss SVP party has emerged. It would allow UBS to use AT1 bonds for 50% of its capital requirements, reducing the financial burden compared to the original proposal. Ermotti welcomed the political interest in finding a balanced solution but noted the uncertainty remains.

What Are Analysts Watching Next?

UBS is also preparing for further cost-cutting measures as it nears the completion of the Credit Suisse integration. The bank plans to decommission some IT systems and close data centers in Switzerland, leading to job reductions. Ermotti expects the cuts to be below 3,000 by early 2027.

The integration of Credit Suisse has already reduced UBS's workforce from 120,000 to about 105,000. The process is expected to continue as the bank streamlines operations and consolidates systems. The final migration of Credit Suisse clients to UBS systems is scheduled for early 2026.

UBS is also exploring leadership succession plans. Ermotti is expected to step down after completing the Credit Suisse integration by the end of 2026 or early 2027. Potential internal candidates include Aleksandar Ivanovic, Iqbal Khan, and Beatriz Martin.

The regulatory and operational developments at UBS continue to draw attention from investors and analysts. The bank's ability to navigate the Swiss regulatory environment and complete the integration of Credit Suisse will be key factors in its performance going forward. The outcome of the national bank charter application could also influence UBS's strategic direction in the US market.

UBS has not ruled out the possibility of relocating its headquarters if the Swiss regulatory reforms remain unchanged. The bank has engaged in discussions with US authorities, including Treasury Secretary Scott Bessent, to explore alternative options.

UBS's position as a major global financial institution remains under pressure as it balances regulatory challenges, cost reductions, and expansion goals. The bank's ability to maintain its competitive edge will depend on its success in navigating these complex issues.