UBS faces new Swiss capital requirements for foreign units

Swiss regulators are moving to strengthen capital requirements for UBS following the 2023 collapse of Credit Suisse. The Swiss National Bank (SNB) has proposed that UBS must fully back its foreign subsidiaries with high-quality Common Equity Tier 1 (CET1) capital held within Switzerland.

Currently, UBS backs foreign participations with between 45% and 60% CET1. Moving to 100% coverage is estimated by the SNB to require approximately $20 billion in additional qualifying capital. The regulator aims to prevent contagion, ensuring that if a foreign unit faces pressure, the parent company has sufficient liquid capital to ring-fence or divest the unit without triggering a wider systemic collapse.

The push for stricter oversight follows the instability caused by the Credit Suisse crisis, where a loss of market trust led to a digital bank run despite the bank meeting existing regulatory capital requirements. Swiss authorities facilitated the acquisition of Credit Suisse by UBS to stabilize the banking system, but the merger has raised concerns regarding whether UBS has become too large to regulate or too big to fail.