Swiss Government Proposes 7-Year UBS Capital Rule

The Swiss government has announced that UBS, Switzerland’s largest bank, will be given seven years to meet new capital requirements for its foreign branches. This is part of a wider reform of banking rules aimed at strengthening the country’s financial system after the collapse of Credit Suisse and its takeover by UBS in 2023.

Why the Change Is Needed

The government, together with the Swiss National Bank (SNB) and the Swiss Financial Market Supervisory Authority (FINMA), said the measure is essential for achieving the "too big to fail" goals. These rules are designed to make sure that very large banks like UBS have enough money to withstand financial shocks, protecting the economy and taxpayers.

The new rule will increase UBS’s capital requirements in steps over seven years. This gradual approach gives the bank time to raise funds without disrupting its operations. The Swiss authorities say this phased plan balances safety and stability with practical implementation.

What UBS Says

UBS executives have expressed concerns that the additional $24 billion capital requirement could put the bank at a disadvantage compared to other global banks. They argue that the extra financial burden could make UBS less competitive internationally and may affect Switzerland’s position as a financial hub.

Despite these concerns, Swiss regulators maintain that having well-capitalized banks is crucial for long-term economic stability. They believe the phased approach will allow UBS to adjust while meeting the new safety standards.

Consultation and Feedback

The Swiss government has opened a formal consultation period to collect opinions from various stakeholders, including banks, political parties, and industry groups. Feedback will be accepted until January 9, 2026. After reviewing the comments, the government will finalize the new law and submit it to the Swiss parliament for approval next year.

This consultation process is standard in Switzerland and allows experts and the public to influence major financial regulations before they become law.

Background: Credit Suisse Collapse

The new capital rule comes in the wake of Credit Suisse’s collapse in 2023, which shocked the global banking sector. UBS acquired Credit Suisse in a government-backed deal to prevent a broader financial crisis. The incident exposed weaknesses in Switzerland’s banking system and highlighted the risks of large, interconnected banks failing.

Swiss authorities have since focused on strengthening banking regulations, including tighter capital rules, stress tests, and oversight, to ensure that similar events do not occur in the future. The new UBS capital rule is a key part of this broader reform plan.

Importance for Financial Stability

The measure is intended to make UBS more resilient in times of financial stress. Having adequate capital means the bank can absorb losses without collapsing or needing government assistance. This is particularly important for a bank as large and influential as UBS, which operates not only in Switzerland but also around the world.

By requiring UBS to gradually increase its capital over seven years, the government aims to protect the Swiss economy, maintain investor confidence, and reduce the likelihood of a financial crisis.

Impact on UBS and Switzerland

For UBS: The bank will need to carefully plan to raise the extra capital over the next seven years. This could involve retaining profits, issuing new shares, or other financial measures.

For Switzerland: Implementing the rule strengthens the country’s reputation as a safe and stable financial center. Investors may view Swiss banks as more reliable because they have sufficient capital buffers.

For the global banking sector: UBS’s compliance with these rules may set an example for other large international banks, showing that gradual capital increases are a practical way to improve stability without sudden shocks.

Government’s Perspective

The Federal Council, along with SNB and FINMA, emphasizes that these measures are critical for protecting both the economy and taxpayers. They argue that large banks like UBS pose systemic risks, meaning that their failure could affect the entire financial system. By ensuring strong capital buffers, the government aims to prevent such risks.

The authorities believe that a seven-year phase-in provides UBS with enough flexibility to meet the new requirements while continuing to operate efficiently.

Next Steps

After the consultation period ends in January 2026, the government will review feedback and adjust the proposal if needed. Once finalized, the new capital rule will be presented to the Swiss parliament for debate and approval.

The law will likely come into effect after parliamentary approval, and UBS will then start its seven-year journey to meet the new capital targets.

Switzerland is taking strong action to ensure that its largest bank, UBS, is prepared for potential financial shocks. By giving the bank seven years to comply with new capital requirements, the government aims to strengthen financial stability, protect the economy, and maintain confidence in Swiss banks.

While UBS has raised concerns about competitiveness, authorities argue that the phased approach balances safety with practicality. This reform is part of a broader effort to prevent future banking crises and secure Switzerland’s role as a major global financial hub.

The consultation period allows stakeholders to voice their opinions before the law is finalized, making it a transparent and participatory process. Once approved, UBS’s compliance with the rule will demonstrate Switzerland’s commitment to a stable and resilient banking system.