FILE PHOTO: A logo of Swiss bank UBS is seen in Zurich, Switzerland, May 1, 2025. REUTERS/Denis Balibouse/File Photo

By Ariane Luthi and Oliver Hirt

ZURICH, Dec 5 (Reuters) - The Swiss government is set to soften part of a banking regulation package that could force UBS to add as much as $24 billion in capital, three people familiar with the matter said.

The government is preparing to water down some of the rules it has direct control over, two of the sources said, speaking on the condition of anonymity because of the sensitivity of the matter.

Those regulations relate to the valuation of deferred tax assets and software, among others, which would amount to about $11 billion of the total extra capital UBS could need to hold. It is not clear how significantly the government will soften them.

Weakening the proposed rules would be a boost for UBS, which has said repeatedly that the wealth manager and Switzerland will be harmed. Industry groups, cantonal governments and influential lawmakers have joined the firm in recent weeks in warning that banking could be rendered uncompetitive.

Switzerland's finance ministry said: "The decision-making process on this matter is not yet complete, and the Federal Council has not yet reached a decision. We are therefore unable to comment on the content (of the rules)."

UBS declined to comment.

The regulatory package is split into measures the government can issue directly and those that parliament decides.

The government is set to stick to its proposal it will make to parliament that UBS must fully capitalise foreign subsidiaries at home, a measure that would account for the biggest chunk of the $24 billion, two of the sources added.

Shares in UBS rose after the Reuters report, and were last up 4.3% as of 1608 GMT, outpacing the wider financials market.

(Reporting by Ariane Luthi and Oliver Hirt; Editing by Tommy Reggiori Wilkes and Elisa Martinuzzi)