UBS is reviewing the structure of its UK banking division ahead of the publication of new supervisory rules by the Prudential Regulation Authority.
In February, the PRA published a consultation on its approach to supervising international banks. The document focused on the regulation of banks that are operating in the UK but are headquartered outside the European Economic Area.
The supervisory approach proposed by the PRA, which will apply to new and existing branches, centres on an assessment of the equivalence of the home state’s supervision of the whole firm, the branch’s UK activities and the level of assurance the PRA gains from the home state supervisor over resolution if the firm is failing.
In UBS’ annual report, published this morning, the firm says the PRA expects new non-EEA branches to focus on wholesale banking and to do so at a level that is not critical to the UK economy.
It says the proposals potentially impact the scope of business that could be undertaken by UBS’ UK subsidiary, UBS Limited.
As a result, the bank is reviewing the relationship between UBS Limited and UBS AG.
It says: “In response to regulatory developments and in consultation with the UK and Swiss regulators, the business and operating model of UBS Limited, our UK bank subsidiary, and its relationship with UBS AG, are currently being reviewed.
“During the second quarter of 2014, we expect to commence the implementation of a revised business and operating model, including changes to the company’s risk profile, to the effect that UBS Limited will bear and retain a greater degree of the risk and reward of its business activities.
“UBS AG will increase the capitalisation of UBS Limited to enable UBS Limited to comply with regulatory requirements given the changed risk profile.”
The PRA consultation closes on 27 May.