Even if legislators soften proposed tougher capital rules, the story highlights how this topic matters for the competitive edge of large banks around the world, including in the US. UBS rescued Credit Suisse almost three years ago in a saga that revived the old "too big to fail" concept. UBS will issue 2025 full-year figures on February 4.

UBS is continuing to lock horns with federal lawmakers in Switzerland, arguing that proposed capital rules threaten the Zurich-listed bank’s business model and could hurt the Alpine state’s economy. The story has even raised speculation about whether UBS might move its HQ abroad, possibly to the US.

The bank has already signaled that it is unhappy with the Federal Council’s proposed capital rules. Berne wants to change the way foreign subsidiaries are treated for the purposes of Common Equity Tier 1 capital – an international yardstick of a bank’s shock absorber capital. In a nutshell, UBS said it would have to set aside far more capital to meet Swiss rules, giving foreign rivals a competitive edge. CEO Sergio Ermotti has urged policymakers to avoid imposing undue burdens.

Sergio Ermotti

UBS estimates that the proposed new rules to provide full equity backing for foreign subsidiaries would lead to about $23 billion in fresh capital demands.

“This measure would put UBS at a significant disadvantage internationally, as UBS would have at least 50 per cent higher capital requirements than its competitors in Europe and the US,” the bank said in a statement yesterday.

Swiss politicians, mindful of the emergency rescue by UBS of Credit Suisse in March 2023, know that the country is now home to only one universal bank. Raising memories of the 2008 financial crash, the Credit Suisse rescue highlighted how stricken banks could end up being bailed out by taxpayers. The UBS takeover, made at the behest of the Swiss authorities, is one of the largest M&A deals of its kind in years. As part of the process, holders of Additional Tier 1 bonds issued by Credit Suisse were wiped out, triggering lawsuits.

UBS is a major player in the world’s wealth management hotspots, including the US. It is seeking a national banking license in the US. A report by Reuters on October 27, 2025, quoting unnamed sources, said the bank is so concerned about Swiss capital rules that it might move its headquarters to the US. About a decade ago, UBS switched from stating its results in Swiss francs to dollars because most of its revenues stem from outside Switzerland.

The bank is due to issue fourth-quarter 2025 and full-year results on February 4. Shares in UBS were down 0.4 per cent mid-afternoon in Zurich trade yesterday. Since the start of this year, they have risen 1.9 per cent. Over five years, they’ve surged 182 per cent.

Excessive
“These excessive capital requirements would lead to very high costs for the bank and weaken the Swiss financial center and the economy. Switzerland already has one of the strictest regulatory capital regimes, with substantial progressive capital surcharges, and a conservative and early implementation of the final Basel 3 rules,” it said.

“The Federal Council's proposals would significantly increase the requirements and would contrast sharply with developments in Europe and the US, where de-regulation initiatives have already been announced. This would further worsen Switzerland's international competitive position following the early implementation of Basel 3,” it said.

The Swiss Bankers Association also criticized the government’s proposal.

“In its consultation response, the Swiss Bankers Association (SBA) rejects the Federal Council’s proposal to amend the Banking Act and the Capital Adequacy Ordinance with regard to the capital backing of systemically important banks’ foreign participations at parent company level,” the SBA said in a statement. “Instead, the SBA calls for proportionate, targeted regulation that is aligned with international standards. It also demands a thorough review of viable alternatives to the proposed maximalist approach as well as a holistic view of all planned measures to avoid unnecessary burdens on the financial center and the real economy. The goal must be to strengthen system stability while also securing Switzerland’s competitiveness as a location for finance and business.”

Credit Suisse lessons
UBS said policymakers should address the lessons learned from the Credit Suisse crisis in a “consistent and targeted manner.”

“The Credit Suisse crisis was primarily the result of the bank's unsustainable strategy and insufficient profitability, inadequate risk management, an inappropriate culture, and weak governance. For too long, Credit Suisse was not forced to take corrective action because regulatory concessions tailored to Credit Suisse undermined the regulations that actually applied,” UBS said.

“This was also noted by the Parliamentary Investigation Commission (PUK), among others,” it said.

On September 29 last year, UBS said that the Federal Council’s proposed regulatory valuation of software, deferred tax assets, and regulatory valuation adjustments was “a combination of the maximum requirements of various jurisdictions and does not take into account the ultimate impact of the overall package in the respective countries.”

“The proposed requirements were also deemed excessive and not internationally aligned in the statements issued by the business community as a whole, employee associations, banks, cantons with strong financial centers, and business-oriented parties. After consulting with the industry and authorities, the Economic Affairs and Taxation Committees (WAK) of both chambers of parliament spoke out in favor of internationally aligned rules,” it said.

UBS said the Federal Council's proposal on capital requirements for foreign subsidiaries is based on the “extreme assumption” that the parent bank must be able to absorb the total loss of all of its foreign subsidiaries during ongoing operations without any negative impact on the parent bank's Common Equity Tier 1 (CET1) capital.

“The proposal extends far beyond the original objective of the Federal Council's report on banking stability dated April 10, 2024. While the report called for 100 per cent Tier 1 coverage, the new proposal calls for approximately 130 per cent Tier 1 coverage. For UBS, this would result in additional CET1 capital requirements of approximately $23 billion and thus very high costs, not only for UBS, but for the entire financial center, households, and companies.

Recent reports (Swissinfo, Bloomberg, others) say the Federal Council's proposed capital rules look increasingly unlikely because the Swiss People's Party, the largest party in the Swiss legislature, has supported an alternative proposal.

As reported in April 2024, the Federal Council wants systemically important Swiss banks – such as UBS – to hold significantly more capital against their foreign units. UBS, Raiffeisen Group, Zürcher Kantonalbank and PostFinance are deemed systemically important lenders.