The Swiss Ständerat has adopted a proposal to require UBS Group to hold 90 percent of its foreign subsidiaries’ risk-weighted capital with high-quality liquidity buffers (CET1), a move that could add up to $33 billion in additional capital requirements since the bank’s Credit Suisse acquisition, according to UBS estimates. The decision follows parliamentary debate over the bank’s regulatory framework, with the bank and industry groups expressing concerns over the measure’s scope and potential economic impact.
UBS described the rule as an ‘uncompromising’ overhaul that fails to address the core causes of Credit Suisse’s collapse, including systemic risks in foreign operations. The bank estimates it would need an additional $16 billion in CET1 under the new rule, on top of existing obligations—including $15 billion already held post-acquisition and $2 billion from recent regulatory adjustments. Annual costs from the acquisition would rise to around $2.5 billion annually, the bank said.
The Swiss Bankers’ Association (SBVg) warned the measure represents an ‘extreme deviation’ from international standards, risking Switzerland’s competitive edge in banking. It argued the 90 percent CET1 requirement would divert capital away from lending and investment activities, while rejecting a prior Ständerat proposal that would have allowed a 50 percent CET1 cap with alternative instruments (AT1) for the remaining exposure. SBVg CEO Roman Studer called the outcome a ‘wasted opportunity’ to balance risk and capital efficiency.
The Swiss People’s Party (SP) supported the stricter rule but deemed it insufficient. SP member Pierre-Yves Maillard argued the full 90 percent requirement should be applied, as foreign operations pose systemic risks that should be borne by shareholders rather than taxpayers. SP’s Eva Herzog emphasized the rule would better protect depositors in crises, though she acknowledged the measure did not fully align with the original WAK-S compromise.
The decision follows UBS’s 2023 acquisition of Credit Suisse, which added $15 billion in CET1 capital but also exposed the bank to heightened foreign-risk exposures. The Ständerat’s move follows a broader push for stricter Basel III compliance in Switzerland, where regulators have previously debated whether foreign subsidiaries should be treated differently from domestic operations.
Industry groups and UBS have signaled they will continue engaging with the parliamentary process, seeking to mitigate the rule’s impact on capital efficiency and competitive positioning in the Swiss financial sector.
