European banks are fighting the law. So far, the law is winning.

UBS shares dropped 7.7% on Tuesday after the bank said the Swiss regulator had effectively told it to hold more capital to cover potential litigation costs. Its German peer, Deutsche Bank, reported a 93% fall in third-quarter net income because of €1.2 billion of extra legal provisions, mostly related to mortgage issues in the US. Both banks, meanwhile, confirmed regulatory probes into their foreign exchange businesses, investigations that are likely to affect other major banks.