UBS's Capital Needs: Balancing Stability and Growth

As UBS, Switzerland's largest bank, grapples with increased capital requirements following its acquisition of Credit Suisse, the country's finance minister, Karin Keller-Sutter, has emphasized the importance of proportionality. In an interview, she stated that UBS's capital requirements should be "proportionate" to its size and the risks it poses to the Swiss economy.

UBS's balance sheet, at approximately $1.7 trillion, is nearly double Switzerland's annual economic output. To prevent another banking crisis like Credit Suisse's, UBS should maintain a robust capital base. However, striking a balance between capital adequacy and competitiveness is crucial.

In April 2023, the Swiss government proposed that UBS should hold an additional $15 billion to $25 billion in capital. This would bring its total capital base to around $30 billion, significantly higher than the current Basel III requirement of $7.4 billion. While this increase aims to enhance UBS's resilience, it could also limit its ability to lend and invest in new opportunities.


To maintain competitiveness while ensuring financial stability, UBS may need to optimize its capital structure. This could involve diversifying its funding sources, increasing its core equity tier 1 capital, and reducing its reliance on wholesale funding. Additionally, UBS should focus on enhancing its internal risk models and stress testing processes to better anticipate and mitigate potential risks.

The Swiss government is expected to finalize its proposals for UBS's capital requirements in the coming months. As UBS navigates this regulatory landscape, it must balance the need for enhanced capitalization with the desire to maintain its competitive edge in global markets.


In conclusion, UBS's capital requirements should be proportionate to its size and the risks it poses to the Swiss economy. By optimizing its capital structure and enhancing its risk management capabilities, UBS can ensure it meets regulatory requirements without hindering its growth prospects. As the Swiss government works to finalize its proposals, UBS must remain adaptable and proactive in addressing the challenges posed by increased capital requirements.