Switzerland's Council of States backed a requirement for systemically important banks to fund foreign subsidiaries with 90% Common Equity Tier 1 capital. The chamber selected the tougher treatment by 29 votes to 16 on 23 September. UBS is currently the only Swiss bank directly affected by the measure. The bill must still pass the National Council, the lower house of parliament.
The vote went against UBS, which had argued that both 90% and the government's original 100% proposal would harm its competitiveness. A parliamentary committee had proposed allowing half of the requirement to be met with CET1 and half with Additional Tier 1 instruments. The upper house rejected that softer structure during its deliberations.
CAPITAL TREATMENT TIGHTENS
The proposed rule concerns how a parent bank deducts and funds investments in foreign subsidiaries. Supporters have presented a higher CET1 share as protection against losses outside Switzerland being transmitted to the domestic parent. The debate follows the 2023 collapse of Credit Suisse and its state-backed takeover by UBS.
UBS has estimated that the 90% requirement would require about $16 billion of additional CET1 capital at its Swiss parent bank. Reuters reported before the vote that the government had said its proposals would require UBS to hold an extra $20 billion in capital. UBS said: "This political outcome is not a compromise and fails to address the root causes of the Credit Suisse collapse."
LOWER HOUSE DECISION AHEAD
The measure is not yet a final capital rule. The National Council must consider the upper house's version, and differences between the chambers may require further parliamentary work. Implementation details and transition arrangements will also determine the eventual cost and timing for UBS.
The next concrete milestone is the lower-house debate and vote on the 90% CET1 treatment. Until both chambers complete the legislative process, UBS's existing requirements remain in force and the additional capital burden is not final. Final approval is not expected before 2027.