Switzerland's largest bank UBS has been ordered to scale back its lobbying campaign in a bitter dispute with the government over capital requirements, even as the lender considers extending Sergio Ermotti's tenure as chief executive. The government has rejected compromise proposals that would have reduced UBS's required capital buffer by up to $26 billion, hardening its stance on reforms that have divided lawmakers.

Lawmakers have privately warned UBS to reduce the public profile of Ermotti in opposing the changes, with one parliamentarian advising the bank to 'reconsider its lobbying campaign.' The relationship between UBS management and Finance Minister Karin Keller-Sutter has deteriorated significantly, with the government dismissing cross-party compromise proposals presented in December. These recommendations would have considerably watered down the original capital reform plans.

The standoff has forced UBS to revisit its succession planning, with the board in talks about Ermotti staying beyond his planned 2027 departure. The 65-year-old executive had intended to step down once the Credit Suisse integration was complete, but uncertainty about the bank's future capital position has prompted discussions about an extension. UBS has lined up potential successors including wealth management co-heads Iqbal Khan and Robert Karofsky, though the bank maintains it's premature to speculate about succession timing.