Swiss business groups and lawmakers rally behind a deal that could trim roughly $10bn from proposed buffers, easing fears of a competitiveness hit and a home‑market backlash.

Lead

UBS has received a tailwind in its campaign to dilute Switzerland’s toughest‑in‑Europe bank capital overhaul, as an unusual alliance of business groups and lawmakers coalesces around a negotiated compromise. Early discussions among senior figures across the political spectrum and the Swiss Bankers Association point to a solution that would lower the extra capital UBS needs to raise by about $10bn versus the federal government’s initial plan, according to people familiar with the talks. While far from final, the emerging framework is intended to reduce the risk that Switzerland hobbles its largest lender—or pushes it to move activities abroad—while retaining the thrust of post‑Credit Suisse safeguards.

Context

The debate was triggered by Bern’s package unveiled this year to plug perceived gaps in the nation’s ‘too‑big‑to‑fail’ regime exposed by the 2023 collapse of Credit Suisse. The Federal Council has opened a consultation to harden standards, including fuller capital backing of foreign subsidiaries and a phased ramp‑up over seven years. In parallel, draft changes to the Capital Adequacy Ordinance would tighten the definition of core capital and recalibrate buffers for systemically important institutions. UBS, now a behemoth after absorbing its former rival, argues the plan is disproportionate and misaligned with international practice.

Numbers

Depending on the metric, the government’s blueprint was estimated to leave UBS facing between the mid‑$20 billions and low‑$40 billions of additional capital requirements once fully phased in—either via a higher common equity tier 1 (CET1) ratio target and/or stricter deductions for items such as software and deferred tax assets. Bank executives warned that such levels could force a strategic retrenchment or a reallocation of balance‑sheet‑heavy activities to friendlier jurisdictions, eroding Zurich’s status as a global hub.

The shift

In recent days, momentum has inched toward the bank. Several large business associations, industrial lobbies and centrist lawmakers—concerned about Switzerland’s growth outlook amid softer global demand and fresh trade frictions—have signaled openness to a middle way. People involved in the exploratory talks describe a compromise that preserves a tougher regime than before Credit Suisse’s demise, but narrows the final uplift so that UBS’s incremental capital need lands closer to the mid‑teens of billions of dollars rather than the high‑20s. On that arithmetic, the bank’s near‑term dollar gap would shrink by roughly $10bn compared with the government’s opening bid.

Politics

Politically, the compromise calculus is delicate. Public opinion remains in favor of tighter rules—polling this week suggested solid majorities back making UBS hold more capital even if that exceeds international norms. But a hardline package risks unintended consequences: depressing the flow of credit to businesses, reducing market‑making capacity in franc‑denominated instruments, and encouraging shadow‑bank migration. The prospect—however remote—of UBS relocating headquarters or booking centers has concentrated minds in Bern and in cantonal governments that benefit from the bank’s tax base.

Industry stakes

UBS’s arguments have resonated with parts of the corporate sector that rely on deep capital markets and advisory services. Executives point to the competitive gap with U.S. and EU peers if Swiss CET1 requirements were set materially above global standards. They also note that the tougher Swiss definition of capital would amplify the ask. For a bank that now straddles wealth management, investment banking and a larger Swiss universal bank, the cumulative effect of higher risk‑weighted assets and deductions matters for returns.

What’s on the table

Although negotiations remain fluid, four planks are emerging: (1) smoothing: keep the seven‑year phase‑in and add more explicit ‘glide‑paths’ tied to integration milestones from the Credit Suisse rescue; (2) calibration: scale back the end‑state uplift so the CET1 requirement is elevated but not an outlier versus the euro area and U.S.; (3) definitions: temper the strictest deductions—for instance, treating certain software and tax assets with partial recognition—while preserving conservative treatment for cross‑holdings and foreign subsidiaries; and (4) governance: bolster resolution readiness through more frequent ‘dry‑run’ tests of the bank’s living will, accompanied by enhanced disclosure so investors can price the risks without blunt capital surcharges.

The government’s stance

Officials insist the spine of the reform must stay intact: full capital backing of material foreign subsidiaries, meaningful gone‑concern capacity, and credible resolution planning. The sequencing is critical, they argue, to avoid cliff effects in the Swiss mortgage market or the small‑business credit channel. While the Finance Ministry has not publicly endorsed any counter‑proposal, people close to the process say there is room to adjust the calibration if parliament can be persuaded that the trade‑offs are properly mitigated.

Parliamentary path

Under Switzerland’s consensus‑driven system, the timetable runs through a consultation period ending early next year, followed by parliamentary debates. Lawmakers could put forward the compromise and tweak thresholds directly in statute or via directions to the Federal Council for corresponding ordinance changes. If the political middle does not hold, an eventual referendum cannot be ruled out—a scenario that would prolong uncertainty for the bank and for the financial center.

UBS strategy

For UBS, the outcome will shape strategic choices: the balance between wealth‑management growth and capital‑intensive investment‑bank activities; the locus of booking hubs; and the cadence of buybacks and dividends that have underpinned the stock’s post‑merger rerating. Management has already signaled it would continue to contest elements it views as overreach, while engaging behind the scenes to secure predictability. A $10bn easing versus the initial proposal would not erase the burden, but it would reduce the risk of abrupt deleveraging and make it easier to maintain credit provision to the domestic economy.

Risk lens

Even a softened package would leave UBS running with higher structural cushions than before the Credit Suisse debacle. Proponents say this is precisely the point: the social cost of another failure dwarfs the private cost of thicker buffers. Critics respond that capital is not a free good; at some point, it crimps growth, pushes activity offshore and narrows the tax base. The compromise seeks a hinge between these views. Whether it holds will depend on global conditions, earnings resilience and how well supervisors and the bank execute on resolution plans.

What to watch next

Key signposts over the coming weeks include: parliament’s committee agendas and hearing calendars; any refined guidance from the Federal Council on the consultation; and UBS’s own capital trajectory in quarterly results, including risk‑weighted asset migration from integration and model updates. Investors will watch whether the final CET1 target settles meaningfully below the most aggressive early suggestions, and how deductions for intangibles and deferred tax assets are codified.

Broader stakes

Beyond UBS, the episode is a stress test for Switzerland’s model of prudence without isolation. The country’s financial‑center credibility was shaken in 2023 but not broken. Setting a capital regime that is tougher than peers but not punitive could sustain that balance—signaling to global clients that Swiss banks are safe while preserving the innovative capacity that made the industry competitive. Getting it wrong, by contrast, risks shrinking the franchise and shifting activity to London, New York or Asia—moves that would be hard to unwind.

Bottom line

With political and business pressure mounting, a landing zone is in sight: a package that still raises UBS’s end‑state buffers but trims the lift by around $10bn relative to the government’s first pass. That would blunt competitiveness concerns without abandoning the lesson of Credit Suisse: size without swift resolvability is a vulnerability Switzerland cannot afford.

Sources

• Federal Council consultation on capitalisation and capital adequacy (Sept. 26, 2025).

• Reuters reports (Sept. 30–Oct. 3, 2025) on UBS’s objections and signals of compromise.

• Financial Times, Oct. 3, 2025, on business and political backing for a middle‑way plan.

• Polling reported Oct. 3, 2025 showing public support for tougher rules.

• Company and industry statements during the consultation period.