Swiss Senate Mandates 90% Capital Backing for UBS Foreign Holdings

The Swiss Senate voted 29-16 on Wednesday to require UBS to finance 90% of its foreign holdings with Common Equity Tier 1 (CET1) capital. This decision is part of a broader overhaul of the too-big-to-fail framework following the bank's 2023 emergency takeover of Credit Suisse.

The vote rejected a stricter proposal from the Government of Switzerland, which sought a 100% CET1 capital backing for foreign subsidiaries to protect taxpayers from future banking meltdowns. Lawmakers also dismissed a more lenient compromise that would have allowed half of the requirement to be met with cheaper Additional Tier 1 (AT1) bonds.

UBS Chief Executive Sergio Ermotti and Chairman Colm Kelleher had advocated for the AT1 compromise, which the bank estimated would cost $13 billion compared to the government's $20 billion requirement. Ermotti warned that the 100% and 90% proposals were excessive and would impact customers and employees. Kelleher suggested the bank might reconsider its future in Switzerland if regulations hindered its ability to compete, particularly in the United States.

Business associations, led by economiesuisse, lobbied against the strict rules, warning they would increase financing costs and reduce credit availability for small and medium-sized enterprises. The bill now moves to the lower house of parliament, with a final decision expected between late 2026 and 2027.