UBS CEO Says Capital Rules Debate Will Factor In Competitiveness Concerns
UBS Chief Executive Sergio Ermotti said on Wednesday, June 24, that the ongoing Swiss legislative debate over new capital requirements for the bank would take competitiveness concerns into account, as lawmakers in Bern continue working through a draft law expected to determine how much additional capital Switzerland’s largest bank must hold. The remarks come as the bill, submitted to parliament by the Federal Council in April, moves through a legislative process that could see a vote in the full upper house as early as this year.
The capital rules dispute centres on how UBS must back the foreign subsidiaries of its global banking operations. Under the government’s original proposal, UBS would be required to fully back those foreign units with Common Equity Tier 1 (CET1) capital — an international benchmark for a bank’s core loss-absorbing buffer — a requirement the bank estimates would force it to raise approximately $20 billion in additional capital.
UBS has consistently argued the proposed rules go too far. The bank described the original capital plan as “extreme” in earlier public statements, arguing the requirements would weaken its global competitiveness relative to international rivals operating under less stringent regimes. UBS has said the rules would impose capital requirements at least 50 percent higher than those faced by competitors in Europe and the United States.
Lawmakers Explore a Middle Ground
Swiss lawmakers have in recent weeks examined potential compromises that would soften the financial burden on UBS without abandoning the government’s core aim of preventing a repeat of the 2023 collapse of Credit Suisse, which UBS acquired in a state-backed emergency rescue. Four people familiar with the parliamentary discussions, who declined to be identified given the confidentiality of the deliberations, said lawmakers were considering requiring UBS to back its foreign units with roughly 70 to 80 percent CET1 capital rather than the full 100 percent originally proposed. Analysts have told Reuters that an 80 percent requirement would reduce the additional capital UBS needs to raise to roughly $15 billion, while a 50 percent threshold floated in earlier discussions could allow the bank to continue operating at its current core capital levels.
Some lawmakers in the upper house’s Economic Affairs and Taxation Committee, which is leading work on the bill, have also explored whether less expensive Additional Tier 1 (AT1) capital instruments could be used alongside CET1 capital to help preserve UBS’s competitiveness — an approach the Swiss government has resisted, regarding AT1 instruments as carrying greater risk than CET1.
Ermotti has signalled he expects UBS to be affected regardless of the eventual compromise. He indicated last week that the bank was likely to emerge from the regulatory overhaul with at least a “black eye,” according to people familiar with his remarks. At a J.P. Morgan investor conference in London earlier this year, Ermotti said the bank’s preference remained clear: “We want to be a Swiss bank,” he said, while warning that the new rules as originally proposed “would not work” for the bank and described the situation as “quite serious.”
The Competitiveness Argument
UBS has framed the dispute as a matter of national economic interest as much as bank-specific regulation. The bank has argued the proposed rules “would put UBS at a significant disadvantage internationally” and would “further worsen Switzerland’s international competitive position” at a time when regulators in Europe and the United States have moved toward deregulation rather than tightening capital requirements. UBS has also argued that the lessons of the Credit Suisse collapse should be addressed in a “consistent and targeted manner,” contending that Credit Suisse’s failure stemmed primarily from poor strategy, weak risk management, and inadequate governance rather than insufficient capital.
The Swiss Bankers Association has echoed UBS’s position, calling on the Federal Council to pursue “proportionate, targeted regulation that is aligned with international standards” rather than what it described as a “maximalist approach.”
Swiss Finance Minister Karin Keller-Sutter has pushed back on the competitiveness argument, telling reporters in June that she did not believe the new requirements would impair UBS’s competitiveness, though she acknowledged that the bank’s growth abroad would become more expensive under the proposed rules.
Regional and Global Impact
The outcome of the Swiss capital rules debate carries consequences well beyond UBS itself. Since acquiring Credit Suisse in 2023, UBS has become Switzerland’s only remaining global systemically important bank, meaning any regulatory decision affecting its capital requirements has outsized implications for the stability and international standing of the Swiss financial sector as a whole. The debate has also raised questions about UBS’s long-term domicile, with some shareholders, including UBS investor Cevian Capital, suggesting the bank could be forced to consider relocating its headquarters to the United States or the United Kingdom if Swiss capital rules leave it at a structural disadvantage against major US and European rivals.
For international banking regulators, the Swiss debate is being closely watched as a test case for how systemically important banks should be capitalised in the aftermath of a major banking failure, balancing financial stability objectives against the competitive position of national banking champions in global markets.
Background
UBS rescued Credit Suisse in March 2023 in an emergency, government-backed deal following a crisis that revived longstanding “too big to fail” concerns about the banking sector first raised during the 2008 financial crash. The Swiss government has pursued tighter capital requirements for UBS since the rescue, with the Federal Council submitting draft legislation to parliament in April 2026. UBS chief executive Sergio Ermotti, who returned to the role to steer the bank through the Credit Suisse rescue, has led the bank’s public campaign against the proposed rules for more than a year. UBS reported net profit attributable to shareholders of $3.04 billion in the first quarter of 2026, an 80 percent increase year-on-year, and the bank has separately stated it is on track to substantially complete the integration of Credit Suisse by the end of 2026, having achieved $10.7 billion in cumulative gross cost savings in 2025.
What Happens Next
Discussions within the upper house’s Economic Affairs and Taxation Committee remain subject to confidentiality, but further parliamentary discussion of the bill is expected later this year, with a vote in the full upper house considered unlikely before the autumn. The Federal Council is expected to provide further clarity on the scope of any compromise as the legislative process advances. UBS has said its ultimate goal is to reach a resolution that allows it to continue competing as a global bank from its Swiss base under its current business model, while lawmakers continue weighing financial stability considerations against concerns over the bank’s, and the country’s, international competitiveness.
