Swiss lawmakers have moved toward tougher capital requirements for UBS, signaling a significant shift in how Switzerland is approaching the risks associated with its largest bank after the 2023 collapse of Credit Suisse. The upper house’s decision to require 90% Common Equity Tier 1 backing for UBS’s foreign units went further than many expected and underscored the political sensitivity surrounding financial stability, taxpayer exposure and the country’s global banking position.

UBS Faces a Higher Capital Requirement

Under the proposal approved by the upper house, UBS would have to back its foreign subsidiaries with 90% CET1 capital. Under current rules, the requirement is 60%, and the bank is not restricted to using only CET1 capital. The parliamentary decision rejected a compromise that would have allowed UBS to meet the requirement with a combination of 50% CET1 and 50% Additional Tier 1 capital, which is generally less expensive for banks to maintain.

UBS estimates that the 90% requirement could result in approximately $18 billion of additional capital. The bank has argued that substantially higher capital requirements could weaken its international competitiveness and affect the economics of its global business model.

Credit Suisse Collapse Shapes the Political Debate

The regulatory debate cannot be separated from Credit Suisse’s 2023 failure and its subsequent takeover by UBS in a state-backed transaction. Switzerland is now reassessing its “too big to fail” framework, including capital requirements, recovery and resolution planning, liquidity rules and the powers available to financial authorities during a crisis.

The political calculation is particularly significant because UBS’s balance sheet is larger than Switzerland’s economy. That creates a structural dilemma: maintaining a globally competitive banking institution while ensuring that a future crisis does not leave Swiss taxpayers exposed to an institution whose size could overwhelm domestic resources. The Swiss National Bank reinforced the financial-stability argument on September 24, saying that 90% CET1 backing was a substantial amount, although it noted that 100% would provide even greater financial protection.

UBS Lobbying Meets Broader Political Resistance

UBS and major Swiss business groups had pushed lawmakers toward the more moderate CET1-and-AT1 compromise. UBS Chairman Colm Kelleher warned that the bank could have to reconsider its future in Switzerland if regulation became excessively restrictive, while CEO Sergio Ermotti criticized the 90% proposal as insufficiently different from the government’s original 100% plan.

Reuters reported that the bank’s campaign may have had an unintended political effect. Some observers argued that aggressive lobbying reinforced concerns among lawmakers and regulators about the influence and systemic importance of UBS. The episode illustrates the difficulty of negotiating banking regulation when public confidence remains shaped by a recent financial institution failure.

What Comes Next for UBS and Swiss Banking

The 90% proposal is not yet final. The legislation must still pass through Switzerland’s lower house, with a final decision potentially extending into 2027. The next stage will determine whether the upper house’s position survives further parliamentary negotiations or is modified as lawmakers weigh financial stability against UBS’s international competitiveness.

For global investors, the key variables will be the final capital requirement, UBS’s eventual capital-management response and the broader direction of Switzerland’s banking framework. The outcome could influence how the country’s largest financial institution allocates capital, manages its international subsidiaries and balances shareholder distributions with stronger balance-sheet protection in the years following the Credit Suisse crisis.