The case

Yesterday, Swiss lawmakers (WAK-S) decided on new capital requirements for UBS. Going forward, the UBS will be required to back its foreign holdings with 50% CET1 capital, while AT1 instruments may be used to cover the remaining 50%.

Source: WAK-S, and SonntagsZeitung 30.08.2026, page 34 “Alibireform”, and today’s Swiss Press. 

The commentary

The Swiss government wants UBS to hold around USD 20 billion in additional Common Equity Tier 1 (CET1) capital to strengthen financial stability following its emergency takeover of Credit Suisse in 2023. UBS has argued that the proposed requirement is excessive.

The compromise is significantly less stringent than the original proposal, with several key elements substantially diluted, according to Professor Zellweger-Gutknecht.

A key question is whether 50 % of the additional capital requirement can be met with AT1 instruments, compared with the 20 % proposed by Zellweger-Gutknecht. Another important issue is when AT1 capital could be converted into equity, a move that requires approval by the general meeting of shareholders.

This approval could either be obtained in advance, as Zellweger-Gutknecht advocates, or only when the conversion becomes necessary, as UBS prefers. Zellweger-Gutknecht argues that shareholders would be unlikely to approve such a conversion in the midst of a crisis because it would significantly dilute, and potentially wipe out, the value of existing shares.

The reform could become little more than a box-ticking exercise, failing to provide an effective capital backstop when it is most needed, Zellweger-Gutknecht has warned.

WAK-S’s proposal will next be debated by the Council of States during the autumn session, before moving to the National Council. A decision by the lower house is not expected until next year, and a referendum remains possible.