UBS has won a significant victory in its battle with the Swiss government after influential lawmakers backed a major watering down of proposed regulations that would slash requirements for the toughest form of capital by half. The decision boosts Switzerland’s biggest bank and its CEO Sergio Ermotti, who called the government’s plans excessive, warning they would damage UBS’s international competitiveness and Switzerland’s standing as a global financial centre. At the heart of the dispute is a federal proposal to force UBS to fully capitalise its foreign subsidiaries at its Swiss parent using common equity tier one (CET1), the highest-quality and most expensive form of bank capital.

Under the compromise proposal confirmed by government sources, UBS would still have to fully back its foreign subsidiaries but could meet up to half the requirement with additional tier 1 (AT1) bonds rather than CET1. JPMorgan analysts estimate UBS would need to raise only $400mn in additional CET1 capital and about $16bn in new AT1 bonds under this scenario, compared to the original $20bn CET1 requirement. The government proposed the tougher rules following the 2023 collapse of Credit Suisse, which UBS took over in an emergency rescue.

AT1 bonds remain politically sensitive after regulators wiped out SFr16bn of the instruments during that rescue, a move later ruled unlawful by the Federal Administrative Court. UBS criticised the original measure as excessive and out of line with international standards. The nonbinding nod from the Economic Affairs and Taxation Committee is only the first step; final approval requires support from both houses of parliament, with debates expected to continue for months.