A proposal had been introduced on Monday by the second-largest political party in the Swiss parliament, advocating for tighter regulations on UBS. The measures outlined in the plan had included significantly increasing the amount of capital that the bank would be required to hold. This initiative had been presented by the Social Democrats (SP), who had argued that UBS should maintain an additional $40 billion in capital. Their proposal had been based on the assumption that UBS had possessed $78 billion in Common Equity Tier 1 (CET1) capital—a key indicator of financial strength—by the end of 2023.Â
Although parliamentary approval for the proposal had been considered unlikely, the initiative had contributed to mounting pressure from left-wing political groups for stricter regulatory measures on Switzerland’s largest and last remaining systemically important global bank. The necessity of such measures had been emphasized following the collapse of Credit Suisse in 2023, which had resulted in its acquisition by UBS.
In response to these calls for increased capital requirements, UBS had continued to resist demands for higher reserves. The bank had reaffirmed its commitment to a regulatory approach that had been forward-looking and supportive of Switzerland’s position as a major financial hub. It had been stated that any modifications to capital requirements should be carefully calibrated, proportionate, and aligned with international standards. Moreover, special consideration had been requested regarding the impact on competitiveness and economic costs.
A recent decision made by the Swiss finance ministry had granted UBS temporary relief from heightened capital requirements. It had been determined that the issue of capitalizing UBS’s foreign subsidiaries should be decided not solely by the government, but also by the Swiss parliament. As a result, the immediate imposition of stricter regulatory measures had been postponed. However, this decision had also extended the period of uncertainty regarding the regulatory framework under which UBS would be required to operate.
The justification for the proposed regulatory changes had been rooted in concerns about financial stability, with the Social Democrats asserting that stronger safeguards would be necessary to protect Switzerland from potential future banking crises. The lessons drawn from the collapse of Credit Suisse had been cited as evidence of the need for comprehensive reforms. It had been emphasized by members of the parliamentary committee that had investigated the Credit Suisse collapse that financial crises could emerge with little warning.
A series of additional measures had also been outlined in the proposal. Among them, UBS had been expected to contribute financially to a state-backed guarantee, ensuring that public funds would not be immediately burdened in the event of a financial crisis. Moreover, the bank had been encouraged to implement a clearer internal separation between its various business divisions. This restructuring had been aimed at reducing the risks associated with interconnected financial operations and mitigating the potential for systemic instability.
A further provision in the proposal had called for the establishment of an earnings pool within the Swiss National Bank. Under this arrangement, a portion of UBS’s dividends and executive bonus payments exceeding a predefined threshold would be set aside for several years. These retained funds would then be accessible in times of financial distress, serving as an additional safeguard against future crises.
While these proposals had been put forward as precautionary measures to strengthen Switzerland’s banking sector, significant resistance had been anticipated. UBS and its supporters within the financial industry had repeatedly expressed concerns that excessive capital requirements could place Swiss banks at a competitive disadvantage on the global stage. Additionally, it had been feared that overly restrictive regulations could limit UBS’s ability to invest and expand its international operations.
Despite these objections, the broader debate over banking regulations in Switzerland had continued. The collapse of Credit Suisse had prompted extensive discussions regarding the adequacy of existing financial regulations, and political divisions on the issue had remained evident. Those in favor of increased oversight had maintained that stronger capital requirements would serve as an essential safeguard against financial instability, while opponents had warned against the unintended economic consequences of imposing overly strict regulations.
As global financial conditions had evolved, Switzerland had faced additional pressures in determining its regulatory stance. While the United States and other major economies had been considering loosening banking regulations, the Swiss government had been weighing whether a more conservative approach would be necessary to protect its financial sector. Given UBS’s role as a globally significant institution, any regulatory changes in Switzerland had been expected to have broader implications for the international banking industry.
In the coming months, continued debate over financial regulations had been expected within both the Swiss parliament and the broader financial community. The balance between financial stability and economic competitiveness had remained at the center of these discussions. While the immediate implementation of stricter regulations had been unlikely, the ongoing scrutiny of UBS’s capital reserves had underscored the lasting impact of the Credit Suisse collapse and the broader concerns regarding systemic risks in the banking sector.
