Switzerland is reportedly considering a new pitch to soften capital requirements on UBS that, if implemented, could shave billions of dollars off the burden the Swiss bank is facing under a draft law submitted by the government.
“Draft legislation submitted to parliament in April aims to introduce tougher rules to prevent a repeat of the Credit Suisse meltdown by requiring UBS to fully back its foreign units with Common Equity Tier 1 (CET1) capital,” reported Reuters.
Under new proposals, UBS, which successfully absorbed its domestic rival Credit Suisse in 2023 through a government-choreographed merger, would need to back its foreign subsidiaries with around 70% or 80% of CET1 capital instead of the government’s requirement of 100%.
Swiss lawmakers earlier floated a separate concession pitch that required at least 50% CET1 backing. The proposal went at the hearing table in May 2026, as top government officials and UBS executives jointly faced parliamentarians in a heated meeting in Bern.
Switzerland’s efforts to impose tougher capital requirements have weighed on UBS’s share price, causing friction between Finance Minister Karin Keller-Sutter and the banking biggie, pitting conflicting concerns like Switzerland’s financial stability and the venture’s competitiveness against each other.
In April, during her interaction with the Blick editorial team, Keller-Sutter panned UBS’ lobbying efforts, calling them “unprecedented.”
“You can have differing opinions. However, it is not common practice to challenge our institutions so forcefully. This is a rather new style in how a company interacts with the state. I have seen very intense referendum campaigns in the past, but the behaviour of a private actor lobbying with this level of intensity is new,” she said.
The European country’s government estimates its policy roadmap would require UBS to raise about USD 20 billion in additional CET1 capital. An 80% CET1 backing requirement, however, would reduce the figure to roughly USD 15 billion, analysts told Reuters, citing that a 50% CET1 demand could allow UBS to keep operating at current core capital levels.
“To support UBS’s competitiveness, some lawmakers hope to rely partly on less expensive Additional Tier 1 capital alongside CET1. The government sees AT1 as riskier. The proposals now under consideration in parliament envisage varying levels of AT1 entering the mix,” the media house stated further.
Lawmakers could also seek to link a fee UBS must pay for a planned public liquidity backstop—a cash safety net for big banks—to its capital requirements. The upper house committee, currently in charge of the banking bill, is seen as sympathetic to UBS’ argument that costly regulation will hurt its business and the economy. However, another section of lawmakers still wants to see stricter regulation for the bank when the legislation moves to parliament for voting later in 2026.
As per the sources, a compromise between 50% and 100% CET1 backing of UBS’s foreign units could, therefore, emerge from the committee as lawmakers pursue a proposal robust enough to pass a floor vote.