Business Context and Reporting Period
This Form 6-K filing by UBS Group AG and UBS AG, dated April 22, 2026, serves as an ad hoc announcement regarding the Swiss Federal Council's final Capital Adequacy Ordinance (CAO) and proposed amendments to the Banking Act. The filing addresses regulatory capital treatment changes for Swiss-headquartered banks, specifically impacting capitalized software, prudential valuation adjustments, and foreign participations.
Key Financial Metrics and Capital Impact
The filing details significant estimated impacts on Common Equity Tier 1 (CET1) capital based on the balance sheet as of December 31, 2025:
- CAO Changes Impact: Expected elimination of approximately USD 4 billion in net CET1 capital at the Group level, reducing the CET1 ratio by around 0.8 percentage points. At UBS AG standalone, the impact is estimated at USD 2 billion.
- Foreign Participations Impact: Proposed full deduction of foreign participations would require UBS AG to hold an additional USD 20 billion in CET1 capital, phased in over seven years.
- Total Incremental Capital Requirement: Including the Credit Suisse acquisition legacy requirements (USD 15 billion) and new regulatory proposals, UBS estimates a total additional CET1 capital requirement of approximately USD 37 billion.
- Capital Cost: The total additional capital requirement implies an annual capital cost of around USD 3 billion.
- Pro-Forma Ratios: Under the proposed measures, the de facto minimum CET1 capital ratio at the Group level is estimated to fall to around 17.6% (from a starting point of 14.0%).
Material Changes and Regulatory Timeline
Material changes stem from new Swiss regulatory mandates rather than operational performance shifts:
- Capitalized Software: Must be amortized over no more than three years for capital purposes, effective January 1, 2029.
- Prudential Valuation Adjustments: Revised to result in higher capital deductions, effective January 1, 2027.
- Foreign Participations: Proposed 100% deduction from standalone CET1 capital, phased in starting with a 65% deduction in the first year, increasing by 5 percentage points annually.
- AT1 Instruments: The Federal Council decided not to proceed with proposed adjustments to Additional Tier 1 capital instruments for the time being.
Guidance, Outlook, and Management Commentary
Management strongly disagrees with the proposed regulatory package, characterizing it as extreme, lacking international alignment, and potentially misleading in government assertions. Key points include:
- Targets Maintained: UBS maintains its target of an underlying return on CET1 capital of around 15% and a cost/income ratio of less than 70% by the end of 2026, as no regulatory changes are effective before 2027.
- Capital Returns: The company remains committed to its planned 2026 capital returns.
- Economic Impact: Citing a BAK Economics study, UBS warns that the proposed full deduction of foreign participations could result in cumulative GDP losses of up to CHF 34 billion in Switzerland over ten years.
- Next Steps: UBS is evaluating the documents and will provide additional comments with its Q1 2026 results on April 29, 2026. The company will continue to engage in parliamentary deliberations to mitigate economic harm.
Investor Verification Checklist
- Verify the final parliamentary outcome of the proposed Banking Act amendments regarding foreign participations, as the current proposal is not yet law.
- Monitor the Q1 2026 earnings release (April 29, 2026) for updated management commentary and refined capital impact estimates.
- Assess the timeline for the phased implementation of the 100% foreign participation deduction and its effect on UBS AG's standalone liquidity.
- Review the specific amortization schedules for capitalized software to understand the 2029 implementation impact on the balance sheet.
- Confirm whether the "misleading" assertions by the Swiss Federal Council regarding peer comparisons and pro-forma ratios are addressed in subsequent regulatory filings.