Swiss media reported on September 27, citing people familiar with the matter, that at least eight international banks have told UBS Group AG (UBS) management they are willing to discuss a merger or other forms of consolidation.

New capital rules drive merger discussions

On September 23, the Swiss Council of States passed a plan requiring systemically important banks to cover 90% of their investments in overseas subsidiaries with Common Equity Tier 1 capital. The plan still must go through subsequent parliamentary procedures. UBS Group AG (UBS) estimates that if it is ultimately implemented as proposed, its parent bank would need to hold about US$16 billion in additional Common Equity Tier 1 capital; combined with previously announced regulatory adjustments, the total new requirement would be about US$18 billion. UBS Group AG (UBS) believes the Council of States plan would sharply raise capital requirements and said it will continue to seek amendments during the subsequent legislative process.

After the regulatory proposal was introduced, UBS Group AG (UBS) management revisited ways to reduce the group's exposure to Swiss capital rules, including the possibility of merging with a foreign bank.

Foreign banks express interest in contact

The latest disclosure adds information on the number of potential counterparties: at least eight international banks have expressed interest to UBS Group AG (UBS) in holding discussions. The information currently made public remains at the stage of expressions of interest and discussion of options, with no announced merger agreement or formal offer.

Swiss Finance Minister Karin Keller-Sutter said on September 26, when asked about the possibility of UBS Group AG (UBS) moving abroad, that relocation would be quite complicated in legal and cost terms. UBS Group AG (UBS) said it does not comment on merger speculation.