Karin Keller-Sutter blasts lawmakers’ plan to ease UBS capital rules

Switzerland’s finance minister isn’t mincing words. Karin Keller-Sutter publicly criticized a parliamentary committee’s decision to water down proposed capital requirements for UBS, calling the compromise a step backward from the government’s effort to shield taxpayers from another banking crisis.

The Swiss Council of States’ Economic Affairs and Taxation Committee voted 10-2, with one abstention, on August 31 for a deal that would let UBS back its foreign subsidiaries with just 50% Common Equity Tier 1 capital. The other half could be covered by Additional Tier 1 instruments, which are cheaper for banks but riskier for the system. The government’s original proposal demanded 100% CET1 backing.

What CET1 vs. AT1 actually means

Think of CET1 capital as a bank’s cash savings account: it’s the hardest, most reliable form of capital a bank holds. Retained earnings, common shares, the stuff that’s unambiguously there when things go sideways. AT1 instruments, by contrast, are more like IOUs with complicated fine print. They’re bonds that can be written down or converted to equity when a bank hits trouble.

If you were around for the Credit Suisse collapse in 2023, you might remember AT1 bonds making headlines for all the wrong reasons. Roughly $17 billion in AT1 bonds were wiped out when Swiss regulators orchestrated the emergency UBS takeover, a move that rattled global bond markets and sent investors scrambling to reassess how these instruments actually work in a crisis.

The government’s position is straightforward: UBS is so large relative to the Swiss economy that half-measures on capital requirements amount to gambling with public money. Under the original proposal, UBS would have needed approximately $20 billion in additional CET1 capital.

The lobbying math

UBS and its political allies have pushed back hard. The bank has framed the full CET1 requirement as “extreme,” arguing it would saddle UBS with roughly $1.7 billion in additional annual operating costs. Members of the Swiss People’s Party and other lawmakers have lined up behind UBS’s position, warning that over-regulation could drive business and talent out of Zurich and Geneva.

Current CET1 requirements for UBS’s foreign subsidiaries sit somewhere between 45% and 60%. The committee’s compromise of 50% CET1 essentially codifies something close to the status quo, which is precisely what concerns the government. Keller-Sutter described the committee’s decision as “not an improvement” over existing rules.

Why the Credit Suisse ghost still haunts Bern

The entire debate exists because of what happened three years ago. When Credit Suisse imploded in March 2023, the Swiss government had to orchestrate a shotgun merger with UBS over a single weekend. The result: Switzerland went from having two globally significant banks to having one that’s even more systemically important than either of its predecessors.

The finance minister has consistently argued that robust capital buffers are the most effective form of taxpayer protection. AT1 instruments, while they technically count as loss-absorbing capital, proved far more complicated in practice during the Credit Suisse episode than regulators had assumed.

Parliamentary deliberations on the capital framework started in mid-2026, and the process is expected to stretch well into 2027. The committee vote is just one stage in a multi-step legislative process. The full Council of States must vote, and the National Council (Switzerland’s lower chamber) will weigh in as well.