Three years after rescuing Credit Suisse from collapse, Switzerland has delivered the bill — and the number on it is roughly $20 billion.

The Swiss Federal Council voted today to require systemically important banks to fully back their foreign subsidiaries with Common Equity Tier 1 capital, the highest-quality form of regulatory capital. The target is one institution in particular: UBS, the country’s lone remaining megabank, which absorbed Credit Suisse in a government-brokered fire sale in 2023.

The decision marks the most consequential rewrite of Switzerland’s “too big to fail” regime since the Credit Suisse crisis exposed a dangerous structural gap. Foreign subsidiaries of Swiss banks could previously be financed roughly half with debt — meaning that when those subsidiaries lost value, the parent bank’s capital ratios eroded from the first franc. When Credit Suisse’s overseas operations spiraled, the bank couldn’t sell them without cratering its own solvency. The state had to step in.

Today’s proposal is designed to make sure that never happens again.

The Numbers

Swiss authorities estimate the new rules would require UBS to hold approximately $20 billion in additional CET1 capital at its domestic parent bank, UBS AG. Separately, changes to the Capital Adequacy Ordinance — covering the regulatory treatment of software and certain hard-to-value assets — will strip roughly $4 billion from CET1 capital at the group level.

UBS frames the picture differently. In an ad hoc statement released today, the bank argues that the total incremental capital burden is closer to $37 billion when including the roughly $15 billion in additional capital already required as a direct consequence of the Credit Suisse acquisition — $9 billion to remove regulatory concessions granted to Credit Suisse and $6 billion to meet existing progressive requirements tied to the combined entity’s larger size and market share. UBS pegs the annual cost of carrying that extra capital at roughly $3 billion.

The bank called the proposal “extreme,” said it “lacks international alignment,” and accused the government of publishing “misleading” assertions about the resulting capital ratios. The Federal Council, for its part, said the package is “appropriate, necessary and targeted, as well as manageable for UBS.”

What Changed: Concessions and Compromises

The final package is notably softer than what the government initially proposed. After a consultation process in which roughly a third of participants backed the original plan and others called for adjustments, the Federal Council dropped several contentious elements.

Deferred tax assets will not require full CET1 backing — a win for UBS, since this would have been an outlier internationally. Changes to the treatment of Additional Tier 1 capital instruments were shelved pending global regulatory developments. Software will be amortized over a maximum of three years, aligned with EU standards, rather than deducted immediately.

These concessions were deliberate. By softening the executive ordinance, the government is building political capital for the harder fight: the legislative package on foreign participations, which must pass through parliament. A senior lawmaker has reportedly signaled that the compromises on the ordinance could buy goodwill for the broader reform, according to Bloomberg.

Finance Minister Karin Keller-Sutter told reporters the government is “unanimously” behind the measures and has made significant concessions. Officials also warned that if parliament waters down the foreign units bill, the deferred-tax compromise could be revisited — a lever that keeps the pressure on.

Who Pays

The Federal Council was blunt about where the costs should fall: not on Swiss clients. If financing costs are passed on according to the principle of causality, the government stated, “they should not be borne by clients in Switzerland.” Cross-subsidizing foreign subsidiaries with domestic lending income would, in Bern’s view, contradict the assumption of an efficient, competitive Swiss credit market.

UBS counters that the damage will spread regardless. A study by independent Swiss research institute BAK Economics, cited by the bank, estimates the impact on borrowing costs and credit supply could result in cumulative GDP losses of up to CHF 34 billion ($38 billion) over a decade, alongside lasting declines in investment, employment, and tax revenue.

The government disputes this framing. “In the short term, a higher return on equity can be achieved with less equity capital,” the Federal Council said. “In the long term, however, more equity capital ensures the bank’s stability.”

What Comes Next

The legislative proposal now heads to parliament, with a closed-door committee debate scheduled for May 4. The timeline stretches well into 2027 at minimum, with a proposed seven-year phase-in for the foreign participation rules — starting at a 65% deduction requirement and rising in 5-percentage-point increments to 100%.

UBS will have ample opportunity to lobby lawmakers during that process. The bank said it “remains committed to contributing to fact-based deliberations,” which is corporate-speak for: this fight is far from over.

UBS reports first-quarter earnings on April 29. Investors will be listening closely for what CEO Sergio Ermotti and Chairman Colm Kelleher — both of whom have spoken extensively against the core proposals — say about the path forward.

The question hanging over all of it is whether $20 billion in extra capital makes the Swiss financial system genuinely safer, or simply thinner-margined. The Federal Council and UBS do not agree on the answer. Parliament will now have to decide.

Sources