Swiss lawmakers advance UBS capital compromise to upper house

Switzerland’s parliament is moving closer to softening the capital rules that were supposed to be the country’s big lesson from the Credit Suisse collapse. A compromise on UBS’s capital requirements is heading to the upper house, the Council of States, after gaining traction in committee deliberations that could reshape how much financial armor the country’s last megabank needs to carry.

The original plan, drawn up in the wake of Credit Suisse’s 2023 implosion, would have required UBS to hold 100% Common Equity Tier 1 capital against its foreign subsidiaries. Under that framework, UBS was looking at raising roughly $20B in additional CET1 capital.

The compromise on the table

The revised proposal would lower the CET1 requirement for foreign subsidiaries to somewhere in the range of 70-80%. At the 80% threshold, UBS’s additional capital burden drops to approximately $15B.

The compromise would allow UBS to use Additional Tier 1 instruments, commonly known as AT1 bonds, to fill part of the capital gap. AT1s are a hybrid form of capital: they look like bonds most of the time, paying coupons to investors, but they convert to equity or get written down if a bank hits serious trouble.

Support from the Swiss People’s Party for a December 2025 version of the compromise would have allowed AT1 bonds to cover up to 50% of the capital requirement. Under that math, the actual new CET1 capital UBS would need to raise could shrink to as little as roughly $400M.

Legislative timeline and what comes next

The upper house’s Economic Affairs and Taxation Committee has meetings scheduled for August 10, 11, and 31, 2026. A decision on August 31 could clear the way for the full Council of States to consider the amended proposal in September.

The broader legislative timeline is targeting final passage by the end of 2026, though the lower house will still need to conduct its own review.

UBS shares hit 17-year highs back in December 2025 when news of the potential AT1 compromise first surfaced.

The balancing act between safety and competitiveness

The acquisition of Credit Suisse by UBS in March 2023, facilitated by the Swiss government due to the former’s collapse, has made UBS Switzerland’s sole global systemically important bank. UBS has contended that the anticipated CET1 capital measures could severely impact its global competitiveness and investor returns, arguing that they are more burdensome than requirements faced by its peers.

AT1 bonds are cheaper for the bank to issue than pure equity, which means less dilution for existing shareholders and lower overall funding costs. During the Credit Suisse crisis, Swiss regulators wrote AT1 bonds down entirely, sparking lawsuits and a global reassessment of AT1 risk.