UBS chief executive Sergio Ermotti rejected a proposal requiring 90% Common Equity Tier 1 backing for the bank’s foreign subsidiaries, saying it offered no meaningful compromise over the Swiss government’s 100% plan. Speaking at a Bank of America event on 22 September, he instead supported a parliamentary alternative split evenly between CET1 and Additional Tier 1 capital. Ermotti said that option would still impose costs but was more workable for the bank. Switzerland’s upper house is due to vote on the competing approaches on 23 September.
The government proposed full CET1 backing for foreign subsidiaries as part of reforms prompted by Credit Suisse’s 2023 collapse and emergency takeover by UBS. A Senate committee offered an alternative allowing half of the requirement to be met with AT1 instruments, while another proposal would set the CET1 share at 90%. The measures would raise the current backing standard and could require UBS to hold substantial additional capital.
COMPETING CAPITAL OPTIONS
Swissinfo, carrying Bloomberg reporting, said Ermotti had previously described the 50-50 proposal as bearable rather than desirable. The report estimated that the approach would require UBS to build about $13 billion of additional AT1 capital over a phase-in period. By contrast, the government’s preferred model could add as much as $20 billion to the bank’s capital requirement.
Swiss business associations have also urged lawmakers to soften the government plan, arguing that a heavier burden could raise financing costs and weaken the country’s competitiveness. Critics of the AT1 compromise contend that common equity provides stronger loss absorption during a bank stabilisation. The debate therefore turns on both resilience and the cost of preserving UBS’s international business model.
THE VOTE WILL NOT END THE PROCESS
UBS has repeatedly argued that full CET1 backing would make growth in foreign subsidiaries more expensive and reduce returns. Ermotti’s latest remarks clarified that the bank does not view the 90% proposal as a middle ground. Its qualified acceptance of the 50-50 option nevertheless shows where it sees a tolerable boundary in the negotiations.
The 23 September upper-house vote is the next concrete milestone, but it will not settle the legislation. The selected proposal must continue through Switzerland’s parliamentary process, including consideration by the lower house, and further changes remain possible. Investors will therefore watch both the vote and the eventual implementation timetable before assessing the final capital effect on UBS.