Swiss lawmakers weigh compromise to ease UBS capital demands

The government’s original proposal, submitted in April, mandated that UBS fully back its foreign units with 100% Common Equity Tier 1 (CET1) capital. This strict requirement, designed to prevent another banking crisis, could force the firm to raise approximately $20 billion in additional capital. UBS executives have publicly labeled the plan extreme, sparking a tense standoff between the bank and Finance Minister Karin Keller-Sutter.

Parliamentary discussions, currently held under committee secrecy, are exploring a shift toward a 70% or 80% threshold. Analysts suggest this adjustment could reduce the bank’s capital burden by roughly $5 billion. Some lawmakers are also debating the inclusion of Additional Tier 1 (AT1) capital to soften the impact, though the government maintains that this instrument carries higher risks. A final decision remains contingent on the support of centrist and moderate parties when the bill reaches the floor later this year. Meanwhile, committee members are examining whether to link these capital requirements to fees for a proposed public liquidity backstop, creating a complex trade-off for the bank's future operations.