The Swiss Federal Council published regulatory proposals on 6 June 2025 that would require UBS to hold approximately USD 24 billion in additional common equity tier 1 capital through a requirement to fully deduct investments in its foreign subsidiaries from its CET1 base. When combined with capital obligations already in place, the proposals would bring the total additional CET1 capital requirement facing UBS to approximately USD 42 billion, according to the bank's own assessment.
UBS responded to the proposals with a statement expressing strong disagreement, characterising the requirements as 'extreme', disproportionate, and misaligned with international regulatory standards. The bank's objection centres on the argument that the Swiss proposals go significantly further than equivalent requirements imposed on peer institutions in other major jurisdictions, potentially placing UBS at a competitive disadvantage relative to its global rivals.
FULLY DEDUCTING FOREIGN SUBSIDIARY INVESTMENTS
The central mechanism of the Federal Council's proposal is the full deduction of investments in foreign subsidiaries from UBS's CET1 capital. Under standard international capital frameworks, banks are generally required to deduct only a portion of their subsidiary investments from regulatory capital, with the remainder absorbing risk weightings. A full deduction requirement is considerably more onerous, directly reducing the CET1 ratio that regulators, investors, and rating agencies use to assess a bank's financial strength.
UBS has built a large international footprint following its 2023 emergency acquisition of Credit Suisse, which added substantial foreign operations to an already complex global structure. The bank now operates significant businesses across the Americas, Europe, and Asia Pacific, with investments in foreign subsidiaries that represent a substantial component of its total balance sheet. A full deduction of these investments from CET1 would materially reduce the capital ratios that UBS reports to the market.
The Federal Council's proposals reflect the broader Swiss regulatory response to the events of March 2023, when the forced rescue of Credit Suisse exposed significant gaps in the framework governing systemically important banks in Switzerland. Swiss authorities, including the Swiss Financial Market Supervisory Authority FINMA, have been reviewing the adequacy of the existing capital rules for UBS as it absorbed Credit Suisse and became an institution of even greater systemic importance to the Swiss economy.
UBS CONTESTS PROPORTIONALITY AND GLOBAL ALIGNMENT
In its public response, UBS argued that the proposed requirements are disproportionate given the steps it has already taken to strengthen its capital position and manage the integration of Credit Suisse. The bank also raised the issue of international competitiveness, noting that applying capital requirements significantly in excess of those faced by comparable institutions in the United States, the United Kingdom, and the European Union could impair its ability to operate on an equal footing in global markets.
The combined USD 42 billion figure cited by UBS — representing both the proposed new requirement and obligations already in place — gives a sense of the scale of the regulatory capital question the bank must navigate. Capital held against regulatory requirements is capital that cannot be deployed in lending, investment banking, or other revenue-generating activities, making the level of the requirement a significant determinant of the bank's long-term return on equity and competitive position.
The publication of the proposals opens a consultation period during which UBS and other stakeholders are expected to submit formal responses to the Federal Council. The final shape of the requirements remains subject to revision, and the outcome of the process will be closely watched by global banking regulators and institutions as a test case for how Switzerland balances financial stability imperatives against the competitiveness of its internationally active banking sector.