Switzerland is having an unusually public argument about money it hasn’t lost yet. On one side sits the Federal Council, the European country’s government, backed by a finance minister who has openly accused the nation’s biggest bank of unprecedented lobbying.
On the other sits UBS, Switzerland’s last global banking giant, which calls the government’s plans ‘extreme’, and warns they could cost it tens of billions of dollars. Caught in the middle are the Swiss people, who, according to a new YouGov poll, overwhelmingly side with the government.
The poll, published in mid-June, found that 79% of Swiss respondents support tougher capital requirements for UBS even if it means the bank pays lower dividends or accepts slower growth, while only 9% are opposed.
To understand why this fight matters, and why it has turned personal, let’s start with what ‘capital requirements’ actually mean.
Knowing things in detail
Think of a bank’s capital as its own savings, money it owns outright, as opposed to money it owes to depositors or bondholders. When a bank makes loans or investments that go bad, capital is the buffer that absorbs losses before customers, or the wider financial system get hurt. Regulators set minimum buffer levels so a bank can survive a bad year, or a bad decade, without collapsing, or needing a bailout.
The gold standard for this buffer is CET1 capital, short for Common Equity Tier 1, the highest-quality capital a bank has, made up mainly of ordinary shares and retained profits.
It is also the most expensive kind of capital to hold, because money sitting in a CET1 buffer cannot be lent out, invested, or paid to shareholders as dividends. The more CET1 a regulator demands, the more conservative, and the less profitable in the short term, a bank tends to become.
This is the lever Switzerland is now pulling, hard, because of what happened to Credit Suisse.
The ghost of Credit Suisse
In March 2023, Credit Suisse, once Switzerland’s second-largest bank, collapsed within days, and was absorbed into UBS in a government-engineered rescue. Switzerland, known for possessing one of the world’s best and safest banking systems, now has a single dominant global bank whose balance sheet is roughly twice the size of the entire Swiss economy.
If UBS were to stumble the way Credit Suisse did, the consequences for ordinary taxpayers could be severe, since a bank that large may be too big for the state to comfortably bail out, and too big to let fail.
The government’s response targets a weakness it believes contributed to the Credit Suisse crisis. How large banks capitalise their foreign subsidiaries. Currently, UBS must back a share of the capital sitting in its international units, in places like the United States and United Kingdom, with capital held at the Swiss parent.
The government wants that share raised dramatically, ultimately to full backing, so problems abroad cannot drain resources from the Swiss parent in a crisis. Bern’s reasoning is that this was precisely the structural gap that left Credit Suisse’s parent under-resourced when trouble hit.
How big is the bill
This is where the dispute turns into real money. Switzerland’s government estimates its full policy package would force UBS to raise around an extra $20 billion in capital at the bank’s Swiss unit.
UBS, using its own calculations, puts the number even higher, saying the proposals, combined with capital already required from absorbing Credit Suisse, would mean holding about $42 billion in additional CET1 capital in total, which it calls ‘neither proportionate nor internationally aligned’.
UBS has repeatedly called the government’s original proposal ‘disproportionate’, and warned of consequences for its competitiveness against global rivals facing lighter capital rules at home. Executives have even raised, without committing to it, the possibility of relocating parts of the bank abroad if the rules become too punishing.
Lawmakers have spent recent months searching for a middle ground. Rather than the government’s original ask of full, 100% CET1 backing of foreign units, cross-party proposals have floated figures as low as 50%, with UBS allowed to meet part of the requirement using a cheaper form of capital called AT1, or Additional Tier 1, debt.
More recent reporting suggests UBS may need to back its foreign subsidiaries with around 70-80% of CET1 capital, down from the government’s original demand of 100%. The debate is still ongoing in parliament, and the final number matters enormously for UBS, since every percentage point either way translates into billions of dollars.
Why the fight turned personal
What has made this dispute unusually bitter, even by the standards of bank regulations, is how UBS has gone about opposing it. Finance Minister Karin Keller-Sutter has accused the bank of running a lobbying campaign with an intensity she says is not normal for Switzerland.
In an interview with Blick, she said that while disagreement is healthy, “it is not common practice to challenge our institutions so forcefully,” adding that “the behaviour of a private actor lobbying with this level of intensity is new”.
According to Swiss broadcaster RTS, Keller-Sutter has said she is hearing from parliamentarians who fear UBS could scale back its financial contributions to their political parties if they vote the wrong way, a dynamic she calls unusual for a private company in Switzerland.
Keller-Sutter has stressed that linking financial support to how a lawmaker or party votes would be illegal under Swiss law. UBS has denied behaving improperly.
Chief executive Sergio Ermotti has defended the bank’s right to make its case, saying UBS has strong arguments it wants heard, and has too much respect for parliament to issue threats.
The Swiss finance minister has framed the standoff as a question of whose interests should ultimately prevail – those of taxpayers or those of UBS.
It is a deliberately stark framing, one that puts UBS in the position of arguing against the country’s own backstop against future bailouts, a difficult place for any bank to stand, especially one that needed a state-orchestrated rescue of its rival just three years ago.
What the public makes of it
This is the backdrop against which the YouGov poll arrived. The poll, conducted in early June among just over 1,000 people from German-speaking and French-speaking Switzerland, was not asking an abstract question about banking regulation. It was asking whether people support tougher rules even at a direct cost to UBS, in dividends and growth, and nearly four in five said yes.
This is not entirely new sentiment. A larger survey of 24,000 people last October by the Leewas Institute found 61% backing extra capital requirements for UBS, even if Swiss rules end up stricter than elsewhere.
Support has not just persisted; it appears to have hardened. That earlier poll found majority backing across the political spectrum, including among business-friendly right-leaning voters, although two-thirds also said it would hurt Switzerland if UBS relocated. The public, in short, wants a safer bank, but not one that leaves.
What happens next
The Federal Council formally adopted its proposal and sent it to parliament in April, making some concessions during consultation but holding firm on the central demand for significantly more capital backing foreign subsidiaries.
From here, the decision sits with Swiss lawmakers, who must weigh public opinion, UBS’s economic importance, and the lessons of Credit Suisse’s collapse against each other. A vote is expected later this year, with implementation, if approved, unlikely before 2028 and a lengthy transition period to follow.
UBS continues to argue the rules go further than international norms require, and will cost it competitive advantage. The government continues to insist that a bank twice the size of the Swiss economy cannot be allowed to carry the kind of structural risk that brought down Credit Suisse. And the Swiss people, watching from the outside, appear to have already decided which version of caution they would rather live with.