Swiss bank union warns 10,000 to 12,000 jobs at risk if capital rules push UBS to relocate

Switzerland's bank employees' union has warned lawmakers that tougher capital rules could cost 10,000 to 12,000 Swiss jobs at UBS if the bank responds by relocating, selling or merging, according to a letter reported by NZZ am Sonntag on Oct. 25. The estimate is the union's, not a UBS plan, and it would come on top of cuts already under way among the bank's roughly 34,000 Swiss employees. The union's president, Michael von Felten, wrote that "no one has yet studied the effect on jobs".

The trigger is the proposal that UBS back its foreign subsidiaries with 90% Common Equity Tier 1 capital, which the upper house of parliament approved in late September; a lower-house committee is now taking up the question. UBS puts the cost at about $18 billion, roughly a 25% increase in its common equity, and has called the level excessive. People familiar with the matter have said the bank has contingency plans that include moving its headquarters or merging.

A full move is not the base case. Wealth Briefing's editor called a complete headquarters relocation unlikely and floated moving only the investment bank's head office as a more plausible step, while Chief Executive Sergio Ermotti said on Oct. 6 that being based in Switzerland is good for the economy, clients and shareholders. The rules are expected to be finalized next year.

For UBS shareholders, the debate is about capital rather than headcount: $18 billion of additional equity would weigh on buybacks and returns. The lower-house committee's position is the next marker, along with any change in how UBS management describes its options.