Switzerland's upper house of parliament, the Council of States, voted on Wednesday to implement new capital rules requiring UBS to back its foreign units with 90% Common Equity Tier 1 (CET1) capital. This decision, which came despite strong lobbying from UBS and other business groups, is considered a significant blow to the bank, which had argued against such stringent requirements.
UBS CEO Sergio Ermotti had previously stated that a 90% CET1 proposal was "not really a compromise," indicating it would impose excessive constraints on the bank. Under existing regulations, UBS's foreign units are backed by approximately 45% CET1 and 17% Additional Tier 1 (AT1) capital. The shift to a 90% CET1 requirement is projected to significantly increase UBS's capital needs by an estimated $20-22 billion.
The vote in the upper house follows a period of debate where Swiss Finance Minister Karin Keller-Sutter advocated for 100% CET1 backing for foreign units, aligning with the Swiss National Bank's position to protect taxpayers. Business groups, including economiesuisse, had also pressured lawmakers, warning that excessive regulation would disadvantage UBS against international rivals and lead to higher financing costs for Swiss industries.
The capital rules bill will now move to the lower house of parliament for further consideration. A final decision on the new regulations is not expected until late 2026 at the earliest, with a more likely timeline pointing to 2027.
