The move by Swiss lawmakers is another stage in the country's efforts to balance protecting its financial system against the risk of capital rules that could put Swiss banks at a competitive disadvantage.

This week Swiss lawmakers were quoted saying that UBS should support its foreign subsidiaries with 50 per cent in Common Equity Tier 1 capital, which is far less than the government, which has sought a 100 per cent backing, wanted.

Reports by Reuters and other news sources said the economic affairs and taxation committee of the upper house of parliament said UBS should be allowed to use cheaper additional Tier 1 capital to make up the other 50 per cent to achieve full capitalisation of its units abroad.

For months, UBS, which is now Switzerland’s only universal bank, has tussled with the government in Berne over proposals on how much shock absorber capital it should be forced to set aside. In March 2023, UBS bought Credit Suisse in an emergency deal at the Swiss government’s request after Credit Suisse was hit by a string of scandals and missteps. The takeover revived fears of creating a banking empire that would be “too big to fail.”

At the core of the matter is that legislators want to balance protecting taxpayers from a future banking crisis against the bank's concerns that tougher capital requirements could undermine its competitiveness. 

"This is not a victory for UBS, it's a solution that serves Switzerland," committee president Erich Ettlin, a lawmaker with the Centre Party, was quoted by Reuters as saying. 

The proposals for new banking regulations were carried by the committee by 10 votes to two, with one abstention. These proposals must be voted on in the upper house before being examined by the lower house committee and chamber. 

Ettlin was quoted saying that at the earliest, the final decision on the capital requirements could be reached at the end of this year, but it would be more likely in 2027.

The Swiss Bankers Association (SBA) said the committee’s proposal still “goes beyond international standards” and said it rejected this “Swiss special path.”

UBS still concerned
UBS said it acknowledged legislators’ efforts to find an alternative to the Federal Council’s “extreme proposals”.  The bank said in a statement last week that it supports “targeted adjustments” to Swiss banking regulation that fit with international standards and tackle the “root causes” of what caused Credit Suisse to unravel as a bank three years ago.

However, UBS said, the committee’s recommendations would cause a “significant increase” in UBS’s costs. Along with other regulatory moves, the proposals would “further increase the financing costs for the Swiss financial centre and economy in an international environment in which other major financial centers are simplifying and streamlining their regulatory frameworks for banks”.  

The bank said, for example, that the committee’s proposals would require UBS’s parent bank (UBS AG) to fully underpin its investments in foreign subsidiaries, with 50 per cent CET1 capital and up to 50 per cent Additional Tier 1 (AT1) capital, up from 45 per cent CET1 capital and 17 per cent AT1 backing under current law. 

“This would represent a substantial tightening of Swiss capital requirements, which are already among the most stringent in the world,” the bank said. 

UBS said it estimated that the recommendations would require it to hold incremental Tier 1 capital of around $13 billion at UBS AG that could be met with AT1 capital. This would add to the incremental $2 billion of CET1 capital that UBS AG will need to hold because of changes enacted by the Federal Council earlier in 2026. 


“The problem at Credit Suisse was not that capital requirements were too low, but rather the far-reaching and untenable exemptions that FINMA granted exclusively to Credit Suisse over a period of years. The logical lesson to be learnt from this would therefore be to rule out such exemptions in future and to implement the applicable rules consistently,” the SBA said, referring to the stance of the Swiss regulator and the problems that had accumulated at Credit Suisse.