Swiss Lawmakers Consider Lowering UBS Foreign Subsidiary CET1 Requirement to 70%-80%
N.R. Finch
Swiss parliamentarians are negotiating a compromise that would cut UBS's capital-coverage requirement for foreign subsidiaries from the government's proposed 100% to 70%-80%, potentially slashing the bank's extra funding burden from roughly $20 billion — a decision that will shape the capital strategy of Switzerland's sole remaining global bank.
The government wants 100% — how far will lawmakers cut?
In April the Swiss government submitted a bill requiring UBS to back its foreign subsidiaries with 100% CET1 capital — common equity tier 1, the hardest, most loss-absorbing form of bank capital.
This means → UBS would need to raise roughly $20 billion in additional core capital.
Four sources told Reuters that parliament now leans toward 70%-80%; a 50% floor was also tabled during a marathon hearing last month.
In plain terms = the government wants full coverage; lawmakers want a discount — and every option from half-off to near-full is on the table.
What does each percentage mean in dollar terms?
100% (government proposal) → approximately $20 billion in extra capital.
80% → analysts estimate roughly $15 billion.
50% → UBS could largely operate on its existing core capital base with minimal top-up.
This reflects a direct cash translation: every notch lower on the ratio takes billions off UBS's bill.
What other bargaining chips are on the table?
Some lawmakers want UBS to be allowed to count AT1 capital — additional tier 1, a cheaper but riskier form of bank capital — toward the requirement, easing compliance costs.
The government is skeptical, arguing AT1 is less reliable than CET1 in absorbing losses during a crisis.
A separate proposal would link the fee UBS pays for the public liquidity backstop — the government's cash safety net for large banks — to its capital requirement: lower capital, higher fee.
In plain terms = lawmakers are offering UBS a cheaper funding path while using fee leverage to ensure a lower requirement does not mean lower protection.
Who decides the final number?
The upper-house committee currently reviewing the bill is widely seen as sympathetic to UBS's argument that heavy regulation undermines competitiveness.
Once the bill reaches a full chamber vote, more lawmakers are expected to push for stricter standards.
This means → the final outcome likely hinges on centrist and moderate votes, not on the committee's own leanings.
How does UBS itself read the situation?
CEO Sergio Ermotti said last week the bank expects to take at least "a black eye" — language signalling UBS has already priced in some degree of capital constraint.
UBS previously labelled the government's 100% proposal "extreme."
This reflects a strategic pivot from outright resistance to damage limitation — where the final percentage lands will set the capital trajectory of Switzerland's only remaining global bank for years to come.
Content is for reference only, not financial advice.