Coverage: weekly note · Information to 6 July 2026
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TGB Weekly Research Note · 6 July 2026
Euro area authorities want simpler capital rules but not less capital, while the Swiss Federal Council has asked parliament to require full CET1 backing of foreign subsidiaries, a rule that in practice falls on UBS.
The desk view
Europe's capital debate has moved from whether to cut requirements to how to simplify them. The ECB has proposed merging the existing capital buffers into two while maintaining resilience, and its supervisors see no evidence that requirements have constrained lending. Switzerland is going further for UBS. The Federal Council's dispatch of 22 April 2026 would require full CET1 backing of foreign participations, adding approximately USD 20 billion at UBS's parent bank. The Swiss National Bank supports the plan and says UBS can comply while continuing to distribute profits. Our reading is that European authorities now treat post-crisis capital levels as a floor to be reorganised, not a cost to be cut.
Europe simplifies the stack but holds the level
On 11 December 2025 the ECB Governing Council endorsed the recommendations of its High-Level Task Force on Simplification, intended to simplify the framework while maintaining the resilience of the European banking system. The centrepiece is the capital stack: existing buffer layers would merge into a non-releasable buffer and a releasable buffer that authorities can lower in bad times, and the leverage framework would shrink from four elements to two, a 3% minimum and a single buffer. The Governing Council also proposed that it be made responsible for a holistic view of overall capital in the banking union, which it said is currently missing.
Overall CET1 requirements and guidance for 2026 remained broadly stable at 11.2%, with Pillar 2 requirements at 1.2% of risk-weighted assets (RWAs). Pillar 2 guidance fell from 1.3% to 1.1%, reflecting lower capital depletion in the 2025 EU-wide stress test, while the combined buffer requirement rose slightly because some countries raised countercyclical buffers. Actual capital sits well above those requirements: the euro area CET1 ratio rose from 12.7% in 2015 to 16.1% in 2025, and was 15.99% for ECB-supervised banks in the first quarter of 2026.
Capital stances in Europe: four recent decisions
| Authority | Decision | Date | Direction | Key figure |
|---|---|---|---|---|
| ECB Governing Council | Simplification proposals | 11 December 2025 | Simplify, keep resilience | Buffers merged into two |
| ECB Banking Supervision | Requirements for 2026 | 18 November 2025 | Broadly stable | 11.2% CET1 requirement and guidance |
| Bank of England FPC | Capital benchmark review | 2 December 2025 | Benchmark lowered | Tier 1 around 13% of RWAs, from 14% |
| Swiss Federal Council | Banking Act dispatch | 22 April 2026 | Higher for UBS | About USD 20bn CET1 at UBS AG |
Source: European Central Bank, Governing Council proposes simplification of EU banking rules (press release), 11 December 2025; European Central Bank (Banking Supervision), ECB keeps capital requirements broadly stable for 2026 amid persisting global challenges (press release), 18 November 2025; Bank of England, Financial Stability Report - December 2025, 2 December 2025; Swiss Federal Council, Too-big-to-fail regulations: Federal Council adopts dispatch and Capital Adequacy Ordinance (press release), 22 April 2026.