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Swiss Lawmakers Set 50-50 Capital Split For UBS Foreign Units

Prime Highlights-

  • Committee passes proposal by 10 votes to two, with one abstention.
  • New trigger set at around 11% CET1 ratio, guiding payout decisions if reached.

Key Facts-

  • Swiss committee sets 50-50 CET1-AT1 capital split for UBS foreign units.
  • Government continues seeking full 100% CET1 backing beyond the committee’s proposal.

Background-

Swiss lawmakers have voted to require UBS to back its foreign subsidiaries with 50% in Common Equity Tier 1 capital, the highest quality form of bank capital, while the government continues pushing for full 100% CET1 backing.

The economic affairs and taxation committee of the upper house said UBS could cover the remaining half with cheaper Additional Tier 1 capital, as lawmakers continue reviewing banking rules after the Credit Suisse rescue.

Committee President Erich Ettlin, a lawmaker with the Centre Party, said the proposal reflects a solution built to serve Switzerland rather than a win for UBS.

Under the plan, UBS would largely keep its current CET1 level while holding more AT1 capital, a cheaper buffer designed to absorb losses during stress.

To reinforce the framework, the committee proposed a trigger at around an 11% CET1 ratio. The safeguard would prompt UBS to pause investor payouts and buybacks, with bonus payments adjusted downward until the bank rebuilds its capital base within a set period.

The Swiss government has sought about $20 billion in added CET1 capital to strengthen stability, while UBS has said a lighter requirement would support its competitiveness and Switzerland’s banking sector.

The committee passed the proposal 10 votes to two, with one abstention. It now heads to the upper house, then the lower house, where lawmakers will continue reviewing the proposal closely. A final decision could come by year’s end, though Ettlin expects it more likely in 2027.