Swiss lawmakers are preparing to debate new capital requirements for UBS next month as they look to strengthen the country’s banking system while ensuring the lender remains globally competitive. The proposed rules, introduced after the 2023 collapse of Credit Suisse, originally called for UBS to hold around $20 billion in additional Common Equity Tier 1 (CET1) capital. However, many lawmakers believe the requirement may be reduced to avoid discouraging investors and limiting the bank’s growth.

Parliamentary discussions are expected to focus on lowering the amount of CET1 capital required to support UBS’ foreign operations. Proposals under consideration range from requiring 50% to 80% capital backing instead of the government’s proposed 100%, potentially reducing the additional capital requirement to between $12 billion and zero. Swiss regulators, including the Swiss National Bank, have warned that weaker capital rules could increase financial risks and leave taxpayers exposed during future banking crises.

UBS has argued that stricter capital requirements would reduce funds available for share buybacks, technology investments, including AI, and international expansion, while also affecting employee bonuses and increasing costs for customers. Lawmakers are therefore exploring a compromise that could allow the bank to use Additional Tier 1 (AT1) capital alongside CET1, aiming to improve financial stability without placing an excessive burden on Switzerland’s largest bank. Final legislation is expected to be considered later this year.

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