Swiss lawmakers ease UBS capital plan, cutting $20B CET1 burden

A compromise before Switzerland's upper house would let UBS back its foreign subsidiaries with 50 percent Common Equity Tier 1 capital, roughly halving a $20 billion government demand.

Swiss lawmakers are set to send a watered-down banking bill to parliament's upper house that would let UBS back its foreign subsidiaries with 50 percent Common Equity Tier 1 capital, roughly halving a $20 billion government demand, according to people familiar with the matter.

The upper house's Economic Affairs and Taxation Committee is leaning toward the 50 percent threshold rather than the 100 percent backing the government sought after UBS's emergency takeover of Credit Suisse in 2023, two of the sources said. No final decision has been taken, and a press conference is scheduled for Monday after 1500 GMT.

Other proposals under consideration would require 75 percent and 80 percent CET1 backing. At the 80 percent threshold, UBS's additional capital burden would drop to roughly $15 billion, while a 50 percent requirement paired with cheaper Additional Tier 1 bonds could shrink new equity needs to as little as $400 million. UBS will likely be allowed to use AT1 capital to make up any gap to full capitalisation of its foreign subsidiaries.

The compromise reflects a balancing act between protecting taxpayers from a future banking crisis and shielding UBS's global competitiveness, which the bank has argued the original plan would undermine. The draft bill is due for debate in the upper house in September before moving to the lower house committee and chamber, where UBS could face a tougher reception. Final capital rules are unlikely to be clear before the end of 2026 at the earliest, and the process is likely to extend into next year.

AT1 bonds ease the equity burden

AT1 instruments are a hybrid form of capital that pay coupons like bonds but convert to equity or get written down if a bank hits serious trouble. They are cheaper for UBS to issue than pure equity, which means less dilution for existing shareholders and lower overall funding costs. During the Credit Suisse crisis, Swiss regulators wrote AT1 bonds down entirely, triggering lawsuits and a global reassessment of AT1 risk — a history that makes the committee's willingness to lean on them notable.

A competitiveness test for Switzerland's last megabank

The takeover of Credit Suisse in March 2023 made UBS Switzerland's sole global systemically important bank. UBS has contended that the anticipated CET1 measures would be more burdensome than requirements faced by its peers and could severely dent its global competitiveness and investor returns. UBS shares hit 17-year highs in December 2025 when news of the potential AT1 compromise first surfaced, showing how investors have priced in a softer outcome.

The final shape of the rules will determine how much capital UBS must hold against its international operations and, by extension, how much it can return to shareholders through buybacks and dividends. A 50 percent threshold with AT1 flexibility would leave UBS's equity buffer largely intact, while a stricter 80 percent outcome would still force the bank to raise billions in new capital. The lower house's reception in the coming months will be decisive.

This article is for informational purposes only and does not constitute investment advice.