Swiss Senate postpones UBS capital bill after running out of time on too-big-to-fail reform

Switzerland’s upper house ran out of time on Thursday and postponed its scheduled vote on a bill that would tighten capital requirements for UBS, rescheduling the decision for September 23. The bill is the country’s latest attempt to rewrite the rules that govern how much capital a too big to fail bank like UBS has to hold against the risks sitting in its foreign subsidiaries — the same structural problem that turned the 2023 rescue of Credit Suisse into a national emergency.

What’s actually on the table is a fairly narrow piece of arithmetic with very large numbers behind it. The Federal Council wants UBS’s foreign operations backed by 100% of Common Equity Tier 1 capital — roughly an extra $22 billion (CHF 18 billion) on top of what the bank holds today, according to the Swiss Observer’s reporting on the bill. The relevant parliamentary committee has proposed a compromise: 50% CET1 supplemented by Additional Tier 1 bonds. A minority in the Senate has been pushing for 90% CET1. The current rule, in place since the post-Credit Suisse overhaul, requires 45% CET1 and 17% AT1.

Debate on Thursday ran past the chamber’s allocated window after a lawmaker’s motion to send the bill back to the government was withdrawn, with Finance Minister Karin Keller-Sutter speaking before the rescheduling was announced, per SWI swissinfo.ch. The withdrawal of the referral motion matters procedurally because it kept the bill alive in the chamber rather than kicking it back to committee — which means September 23 is now a vote on the underlying capital numbers, not a vote on whether to keep debating.

The split inside the chamber reflects a genuine disagreement about how to price the too big to fail risk that UBS’s foreign subsidiaries represent. The government’s 100% CET1 position is the strictest: foreign units would have to be backed entirely by the highest-quality equity, with no room for AT1 bonds to absorb losses first. The committee’s 50%-plus-AT1 mix is closer to how UBS already structures parts of its capital stack and is widely read as more compatible with how the bank actually funds itself. The 90% CET1 minority position sits between the two — stricter than the committee, looser than the government — and is the version most likely to attract crossbench support if September 23’s debate gets that far.

None of those numbers is small in absolute terms. The roughly CHF 18 billion gap between the government’s preferred 100% CET1 and the committee’s 50%-plus-AT1 compromise is a meaningful share of UBS’s total capital base, and it determines how much dry powder the bank has to absorb losses at its foreign units before Swiss taxpayers are on the hook. Switzerland’s too big to fail framework was rewritten in 2023 specifically so that, in a repeat of the Credit Suisse situation, the bill would land on shareholders and bondholders rather than the confederation. The current bill is the part of that rewrite that addresses how UBS, post-merger, looks from outside Switzerland — where most of its balance sheet now sits.

What changes between now and September 23 is mostly procedural rather than substantive. The three positions — 100%, 90%, and 50%-plus-AT1 — are already on the record, and none of the reporting suggests a new proposal is likely to emerge in the next week. The likeliest outcome is that the chamber picks the position closest to a majority and sends the bill on to further parliamentary stages, where the lower house and a potential reconciliation procedure would still need to land on a final number. The arithmetic will get smaller as the bill moves — committee compromises and conference reconciliations almost always do — but the underlying question, of how much equity UBS’s foreign operations have to carry on their own books before parent-company support kicks in, will not.

Sources

• UBS Capital Bill Vote Postponed as Lawmakers Run Out of Time — SWI swissinfo.ch
• Swiss Senate delays decision on tougher UBS capital rules — Swiss Observer