Swiss Parliament Approves 90% CET1 Capital Rule for UBS Foreign Units

Switzerland’s upper house of parliament approved stricter capital rules on September 23, mandating that UBS must hold 90% Common Equity Tier 1 (CET1) capital for its foreign subsidiaries—a requirement the bank estimates will require an additional $18 billion in reserves. This outcome rejects UBS’s preferred alternative of a 50% CET1/50% Additional Tier 1 (AT1) blend, which would have been cheaper but less stringent. The move follows Switzerland’s push to prevent another banking crisis after Credit Suisse’s collapse in 2023, where UBS absorbed the failed institution’s assets and liabilities. The government had originally proposed a 100% CET1 mandate, which UBS deemed excessive, arguing it would distort its competitive position globally. Finance Minister Karin Keller-Sutter emphasized that Switzerland cannot afford a UBS failure, given the bank’s balance sheet exceeds the country’s GDP. The bill now proceeds to the lower house, with a final decision expected by 2027. UBS shares rose slightly, outperforming European banking indices, though analysts noted the decision was not a major negative surprise. CEO Sergio Ermotti called the 90% requirement a distortion of UBS’s competitive edge, while Chairman Colm Kelleher warned that overly harsh rules could prompt the bank to reconsider its Swiss base. The Swiss Bankers Association expressed disappointment, stating that business concerns were not adequately considered. Left-leaning Social Democrats have signaled they may launch a referendum if capital rules are later diluted. The vote was 29–16 in favor of the stricter capital rule.