Although lawmakers in Berne have adjusted planned capital rules that the bank sector has welcomed, it remains worried that regulations will hit the country’s banks, particularly UBS, and threaten its competitive edge and that of Switzerland.

The Swiss government has conceded ground on proposed new capital rules that have angered UBS – the country’s largest bank – but it continues to deman d that the Zurich-listed lender fully capitalise its foreign units. A new banking bill intends to prevent the kind of collapse that brought down Credit Suisse three years ago. UBS bought Credit Suisse, at the behest of the government and central bank, in March 2023.

(The main picture shows the Berne parliament.)

An amendment to the Banking Act reduces the immediate capital requirement facing UBS. Debate remains between lawmakers who insist that stricter rules are needed to protect taxpayers from a potential future bailout and others who worry that excessively tough rules will blunt the competitiveness of Swiss banks. UBS has criticised the rule. A Reuters report in late October last year, quoting unnamed sources, said UBS is so concerned about Swiss capital rules that it might move its headquarters to the US.

“Requiring foreign holdings to be fully backed by hard core capital would put Switzerland at a regulatory disadvantage. At the same time, viable solutions are available that strengthen financial stability without undermining competitiveness. This is in the interests of Switzerland, its economy and taxpayers,” Marcel Rohner, president of the Swiss Bankers Association, said in a statement. 

Regulators in the Alpine state are keen to avoid a repeat of the Credit Suisse saga that damaged the country's image as a stable financial jurisdiction. Switzerland now has one universal bank, making UBS "too big to fail", to coin a phrase often used in the aftermath of the 2008 financial crackup.

So far this year, shares in UBS have fallen by 11.8 per cent. 

Reiterating the kind of points made to WealthBriefing a few weeks ago, the SBA said: “The Federal Council is ignoring the predominantly critical feedback from the consultation process, particularly from the real economy and around 16 cantons. These rightly point out that this maximalist proposal and Switzerland’s unilateral approach will weaken the financial centre, hamper the supply of credit and make financial services more expensive for businesses.”

“The SBA welcomes the fact that the Federal Council has moved away from its extreme proposals in the Capital Adequacy Ordinance. Although the new valuations for specific balance sheet items such as software go beyond international standards, they are now aligned with competing financial centres and are therefore acceptable to the Swiss financial centre. It is positive that the vast majority of banks are now exempt from further tightening measures,” it said. 

From the SBA’s perspective, the Federal Council’s approach regarding the capital adequacy requirements for foreign holdings does not make Switzerland more stable, but instead leads to Switzerland going it alone. Above all, this creates new locational disadvantages.

UBS comments
"UBS continues to strongly disagree with the proposed package, which is extreme, lacks international alignment and disregards concerns expressed by the majority of respondents to the government’s consultations. If adopted, the proposed measures would have far-reaching consequences for the Swiss economy," the bank said in a statement yesterday. "The materials published by the Swiss government today contain assertions that we believe to be misleading. Considering UBS has just received this information, it is in the process of thoroughly evaluating all documents and statements made during the Federal Council’s press conference. UBS will provide additional comments at the latest with its results for the first quarter of 2026, which will be published on 29 April 2026."

UBS said that under the new ordinance, UBS’s capitalised software will be subject to an amortisation schedule of no more than three years for capital purposes, regardless of economic useful life. In addition, prudential valuation adjustments will be revised, resulting in higher capital deductions for assets and liabilities that are subject to valuation uncertainty. The treatment of deferred tax assets arising from temporary differences remains unchanged and aligned with international regulation, the bank said. 

The bank said changes to prudential valuation adjustments will become effective on 1 January 2027, while the changes to the capital treatment of capitalised software must be put in force by 1 January 2029. The amendments announced today, once fully implemented, are expected to remove about $4 billion of net CET1 capital at the group (consolidated) level. This would reduce the CET1 capital ratio at UBS Group by around 0.8 percentage points. 

Under the proposal relating to foreign participations that will now proceed through the parliamentary process, investments in foreign participations would be fully deducted from UBS's standalone CET1 capital. The proposal provides that the amendments would be phased in over seven years, assuming no delays during the parliamentary deliberations, starting with a 65 per cent deduction requirement in the first year and increasing to 100 per cent by 5-percentage-point increments each year. The full deduction of investments in foreign subsidiaries would require UBS to hold additional CET1 capital of around $20 billion, it said. 

Shock absorber 
The new package of regulation increases UBS's Common Equity Tier 1 (CET1) ?core capital by about $20 billion, Switzerland's governing Federal Council said in a statement. (The ratio is a measure of the shock absorber capital banks are required to hold against adverse market moves.)

The SBA has argued that the crisis in Credit Suisse that led it to being acquired by UBS in an emergency takeover in 2023 was a liquidity problem, not one about insufficient capital. 

In its statement yesterday, the SBA said it took a “particularly critical view of the Federal Council’s decision to tighten capital adequacy requirements for foreign holdings”.

“Switzerland already has strict capital requirements by international standards. The proposed tightening contradicts both the Basel Standards and international practice. Despite clear criticism from the financial sector, large parts of the real economy and a clear majority of the cantons, the Federal Council is sticking to its controversial proposal. This will affect the lending terms for bank customers and SMEs. At the same time, more effective solutions are available,” it said. 

The trade body said that the Federal Council’s decision on the Capital Adequacy Ordinance showed it had taken account of certain criticisms raised during the consultation process. 

“Banks may continue to count certain balance sheet items, such as proprietary software and deferred tax assets, towards their Common Equity Tier 1 capital. 

“The requirement to fully amortise software within three years at the latest represents a clear tightening of the rules. Switzerland is thus going beyond the current standard; however, the tightening is aligned with competing financial centres and therefore represents a viable solution for the Swiss financial centre,” the SBA said. 

“The targeted improvements in the provision of information on systemically important banks’ liquidity positions are sensible. In keeping with the Swiss principle of proportionality, many banks that do not pose a threat to systemic stability are now exempt from further tightening,” the SBA continued. 

UBS reiterated its critique of the proposed rules in its annual report, issued in March.

In March, UBS announced that it had secured clearance to convert its US bank, UBS Bank USA, to a nationally chartered bank.