UBS Challenges Swiss Capital Proposal as New Rules Raise Pressure on Overseas Banking Operations

The proposed rules are part of Switzerland’s response to the 2023 collapse of Credit Suisse and are intended to strengthen the country’s banking system and reduce risks to taxpayers from future financial failures. Switzerland's upper house of parliament is due to vote on the new capital framework on Wednesday.

Ermotti said the 90% requirement was effectively similar to an earlier proposal calling for 100% CET1 backing for UBS's foreign units. He has instead supported a parliamentary compromise that would allow subsidiaries to be backed with 50% CET1 capital and 50% Additional Tier 1 instruments, which are less costly for the bank to hold.

The debate highlights the wider challenge facing regulators seeking to strengthen financial stability without imposing capital requirements that materially alter the economics of internationally active banks.

For UBS, additional capital requirements could increase the cost of maintaining overseas operations and affect how the group allocates capital between wealth management, investment banking and other businesses. The bank has argued that excessively high requirements could also affect its ability to compete with international institutions operating under different regulatory frameworks.

Swiss business groups have separately warned that higher capital costs could eventually translate into more expensive financing and reduced access to credit and capital-market services for companies. The government has argued that stronger requirements are necessary to reduce systemic risk following Credit Suisse's failure.

The issue therefore extends beyond UBS's balance sheet. The outcome could influence Switzerland's position as a global financial centre and shape the regulatory framework applied to systemically important banks.

For financial markets, attention will remain focused on the parliamentary vote and the eventual balance between stronger capital buffers, international competitiveness and the cost of banking services.