Switzerland’s parliament is weighing whether to ease one of the most consequential banking regulations to emerge since the Credit Suisse collapse. The compromise under consideration would let UBS back its foreign subsidiaries with 70-80% Common Equity Tier 1 capital instead of the originally proposed 100%.
The difference between those two numbers is not trivial. Under the stricter version, UBS could need to raise as much as $22 billion in additional capital, a figure large enough to reshape the bank’s entire strategic outlook.
What’s actually on the table
CET1 capital is the highest quality form of regulatory buffer, made up of common shares and retained earnings. When UBS absorbed Credit Suisse in 2023, it inherited a sprawling global operation and, with it, a sprawling set of risks. Swiss regulators responded by proposing that UBS fully back its international units with CET1 capital.
The proposed compromise would dial that requirement down to somewhere between 70% and 80%. That’s still a significant capital obligation, but it’s a far cry from the full backing scenario that had UBS staring down a potential $22 billion fundraising exercise.
