Swiss Upper House Passes UBS 90% CET1 Capital Proposal 29-16
nashnova research
Switzerland's Council of States voted 29–16 to require UBS to back its foreign subsidiaries with 90% Common Equity Tier 1 capital, wiping out the stock's earlier gains — this means the market is already pricing in a capital top-up in the range of $20 billion.
What were the three competing proposals?
The fight is over one ratio: how much hard equity UBS's parent must hold against its overseas units.
The government demanded 100% CET1 — the highest-quality bank capital — which would force UBS to inject roughly $20 billion into its Swiss parent.
The upper house landed on 90% — a notch below the government ask, but far stricter than what UBS wanted.
UBS backed a 50% equity + 50% AT1 bond blend. In plain terms = UBS wanted to fill half the requirement with cheaper, quasi-capital instruments, and parliament said no.
Why was AT1 ruled out?
AT1 bonds — a special type of bank debt that can be forcibly written down or converted to equity in a crisis — were the linchpin of UBS's preferred plan.
Finance Minister Karin Keller-Sutter explicitly rejected AT1 as a substitute for CET1, pointing to the 2023 Credit Suisse collapse: Credit Suisse's AT1 bonds were written down to zero, leaving holders with nothing.
This means → the last crisis already proved AT1 is unreliable when it matters most; parliament is unwilling to bet on it again.
How did the finance minister overpower UBS's lobbying?
UBS CEO Sergio Ermotti and Chairman Colm Kelleher publicly warned lawmakers in the days before the vote; several influential lobby groups sent joint letters urging caution.
Keller-Sutter delivered a lengthy speech rebutting each argument. Her central line: "UBS does not deny it has the money to meet the requirement — the question is whether that money goes to strengthen the parent or back to shareholders as dividends and buybacks."
This reflects a decisive tilt toward taxpayer protection over bank competitiveness — UBS's lobbying offensive failed to move the upper house.
How far is the bill from becoming law?
The bill now moves to the National Council (lower house), with debate expected no earlier than year-end.
If the two chambers disagree, the bill will shuttle back and forth until a common version emerges; a final decision is possible no earlier than 2027.
The lower house leans further left. This means → the bill is unlikely to soften toward UBS's position and could even be tightened.
A national referendum also remains possible — Switzerland's direct-democracy mechanism adds yet another layer of uncertainty.
What does this mean for UBS and the market?
Current rules require only 60% capital coverage for foreign subsidiaries, with a quarter of that replaceable by AT1 — the 90% proposal is a major step-up.
Since its emergency takeover of Credit Suisse in 2023, UBS has argued that tougher capital rules would undermine its global competitiveness.
In plain terms = UBS faces two paths over the next few years: either commit hard equity to shore up the parent, or sharply curtail dividends and buybacks — neither will thrill shareholders.
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