Artisan calls on UBS to leave Switzerland over new capital funding rules

(Sharecast News) - UBS came under renewed pressure on Thursday after major US investor Artisan Partners urged the Swiss lender to consider quitting Switzerland, arguing that proposed capital rules would impose punitive costs and destroy shareholder value.

Artisan, which holds more than 60 million UBS shares, said Switzerland's plan to require the bank to back foreign subsidiaries with 90% Common Equity Tier 1 capital would force UBS to hold billions in additional capital that would generate no return.

In an open letter to the board, the investor said Switzerland had become "no longer an attractive or desirable location for UBS", adding that the tougher regime left the bank facing a "grim reality" that justified exploring relocation.

"This cost is excessive, punitive and unnecessary. We urge the board to act in light of the grim reality in which UBS now finds itself and part ways with a country and a regulatory structure that leave it no real choice," it added.

Artisan estimated the proposed rules could require $16bn in extra CET1 capital, representing an annual earnings impact of around $2.4bn and a potential $36bn hit to market value - roughly 23% of UBS's current capitalisation.

The stricter capital framework forms part of Switzerland's post‑Credit Suisse overhaul, with the upper house backing the 90% CET1 requirement last month. The proposal still needs approval from the lower house, with implementation likely in 2027.

UBS has repeatedly criticised the plan as excessive, warning it would undermine competitiveness. Chairman Colm Kelleher previously said unduly harsh regulation could force the bank to reconsider its future in Switzerland.

Despite the investor pressure, UBS said it remained committed to operating as a global bank from Switzerland and would continue to advocate for regulation that is "targeted, proportionate and internationally aligned".

Swiss officials have downplayed the likelihood of UBS leaving the country. Finance Minister Karin Keller‑Sutter said she believed relocation was improbable, even as debate over the capital overhaul intensifies.

Media reports over the weekend suggested several foreign banks had expressed interest in a potential merger or combination with UBS.

Reporting by Frank Prenesti for Sharecast.com