6-K
UBS Group AG (UBS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 6-K
REPORT OF FOREIGN PRIVATE
ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
Date: January 12, 2026
UBS Group AG
(Registrant's Name)
Bahnhofstrasse 45, 8001 Zurich, Switzerland
(Address of principal executive office)
Commission File Number: 1-36764
Indicate by check mark whether the registrants file or will file annual
reports under cover of Form
20-F or Form 40-
F.
Form 20-F
☒
Form 40-F
☐
This Form 6-K consists of the news releases which appear immediately
following this page
Investor Relations
Tel. +41-44-234 41 00
Media Relations
Tel. +41-44-234 85 00
UBS Group AG, News Release, 12 January 2026
Page 1
12 January 2026
News Release
UBS publishes response to the Federal Council’s consultation on the amendment to the
Banking Act and the Capital Adequacy Ordinance
Zurich, 12 January 2026 – UBS published today
its response to the consultation on the amendment to
the
Banking Act and the Capital Adequacy Ordinance.
UBS’s response and some explanatory slides can
be found
here.
UBS Group AG
Investor contact
Switzerland
+41 44 234 41 00
Media contact
Switzerland
+41 44 234 85 00
UK
+44 207 567 47 14
Americas
+1 212 882 58 58
APAC
+852 297 1 82 00
www.ubs.com/media
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Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 1 of 33
Based
on
a
machine
translation
of
the German original
Amendment to the Banking Act and
Capital Adequacy Ordinance
(capital
adequacy requirements
for foreign
subsidiaries of the Parent
Banks of
systemically important banks)
Statement by UBS dated January 9, 2026
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 2 of 33
Table
of contents
Summary
...............................................................................................................................................
3
1.
Introductory remarks ...................................................................................................................
6
2.
Assessment of the package of measures
...................................................................................
7
2.1.
UBS statement of September 29, 2025, on amendments
to the Capital Adequacy Ordinance
..... 7
2.2.
Important developments since the Opening
of the consultation
................................................
10
3.
Assessment of capital requirements for foreign subsidiaries
................................................
13
3.1.
Lessons learned from the Credit Suisse crisis regarding the treatment of
foreign subsidiaries ....
13
3.2.
Assessment of the Federal Council's proposal and the
rejected alternatives
...............................
15
3.2.1.
Assessment of the full deduction of foreign subsidiaries
from Common Equity Tier 1
(CET1)
15
3.2.2.
Assessment of the alternatives rejected in the explanatory
report ..............................
15
3.2.3.
Comparison of the effectiveness of the measures
......................................................
17
4.
Recovery and resolution is key for financial
stability
.............................................................
19
4.1.
Loss-absorbing capacity (TLAC) covers the
entire crisis continuum
.............................................
19
4.2.
Recovery and effectiveness of AT1
.............................................................................................
20
4.3.
Resolution
..................................................................................................................................
21
5.
Economic impact of the proposal .............................................................................................
23
5.1.
Impact on Swiss clients
..............................................................................................................
23
5.2.
Impact on the Swiss financial center and the
economy
..............................................................
25
5.3.
Impact on UBS shareholders ......................................................................................................
26
5.4.
Impact on the stability and strategic future of UBS
....................................................................
27
Appendices
.........................................................................................................................................
28
Appendix 1: Capital adequacy regulations in peer
jurisdictions
.............................................................
28
Appendix 2: Consultation responses and WAK-S/N statement
..............................................................
30
Appendix 3: Total cost of capital
...........................................................................................................
32
List of figures and tables
...................................................................................................................
33
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 3 of 33
Summary
UBS
supports
the
Federal
Council's
objective
of
drawing
lessons
from
the
Credit
Suisse
crisis
and
strengthening
the
regulatory
framework
with
targeted,
proportionate,
and
internationally
aligned measures
. However,
the proposed full
deduction of foreign subsidiaries from
Common Equity
Tier 1 (CET1) capital
extends far beyond the
original proposal from 2024 and clearly
does not meet these
criteria,
which
is
why
we
clearly
reject
the
proposal.
This
measure
would
put
UBS
at
a
significant
disadvantage
internationally,
as
UBS
would
have
at
least
50%
higher
capital
requirements
than
its
competitors in Europe and the US.
These excessive capital requirements would lead
to very high costs for
the bank and weaken the Swiss financial center
and the economy
.
Switzerland
already
has
one
of
the
strictest
regulatory
capital
regimes,
with
substantial
progressive capital surcharges, and
a conservative and
early implementation of
the final Basel
3 rules. The
Federal Council's
proposals would
significantly increase
the requirements and
would contrast
sharply with
developments in Europe and
the US, where
de-regulation initiatives have already
been announced. This
would further
worsen Switzerland's
international competitive
position following
the early
implementation
of Basel 3.
Regulatory adjustments
should address
the
lessons learned
from the
Credit Suisse
crisis
in a
consistent
and targeted manner.
The Credit Suisse
crisis was
primarily the result
of the bank's
unsustainable strategy
and
insufficient
profitability,
inadequate
risk
management,
an
inappropriate
culture,
and
weak
governance.
For
too
long,
Credit
Suisse
was
not
forced
to
take
corrective
action
because
regulatory
concessions tailored
to Credit
Suisse undermined
the regulations
that actually
applied.
This was
also noted
by the Parliamentary Investigation Commission
(PUK),
among others.
In its
statement of
September 29, 2025
,
on the amendments
to the Capital
Adequacy Ordinance
,
UBS
explained that
the proposed
regulatory
valuation of
software,
deferred
tax assets,
and regulatory
valuation adjustments is
a combination
of the
maximum requirements
of various jurisdictions
and does
not take
into account
the ultimate
impact of
the overall
package in
the respective
countries. The
proposed
requirements were also deemed excessive and not internationally
aligned in the statements issued
by the
business community
as a whole,
employee associations,
banks, cantons with
strong financial centers,
and
business-oriented parties.
After consulting
with the
industry and
authorities,
the Economic
Affairs
and
Taxation Committees (WAK) of both chambers of
parliament spoke out
in favor of
internationally aligned
rules.
The Federal
Council's proposal
on capital
requirements for
foreign subsidiaries
is based
on the
extreme
assumption
that
the
parent
bank
must
be
able
to
absorb
the
total
loss
of
all
of
its
foreign
subsidiaries during
ongoing
operations without
any negative
impact on
the parent
bank's Common
Equity
Tier 1
(CET1) capital.
The proposal
extends far
beyond the
original objective
of the
Federal Council's
report
on banking
stability dated
April 10,
- While
the report
called for
100% Tier
1 coverage,
the new
proposal
calls
for
approximately
130%
Tier 1
coverage.
For
UBS,
this
would
result
in
additional CET1
capital requirements
of approximately USD 23 billion and
thus very high costs, not only for
UBS, but for
the entire financial center, households, and companies.
The Swiss economy would be weakened.
The proposal
to protect
Switzerland completely from
losses incurred
by foreign
subsidiaries at
all times
totally ignores the fact that the TBTF package includes
further key measures
that significantly increase
resilience and
were not
yet available
at the
time of
the Credit
Suisse crisis,
e.g., the
senior manager
regime,
expanded restructuring and resolution
options, the public liquidity
backstop, and the expanded
"lender
of
last
resort"
function.
Furthermore, it
does
not
take
into
account that
Credit
Suisse
benefited
from
substantial regulatory relief,
so that Credit
Suisse's weaknesses
were not sufficiently
highlighted in official
publications,
and
that
UBS
operates
a
balanced
and
conservative
business
model
compared
to
Credit
Suisse and other G-SIBs.
.
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 4 of 33
Foreign
subsidiaries
are
an
integral
part
of
the
consolidated
parent
bank's
business
model
.
Completely insulating the parent bank from risks arising from foreign business activities that are booked
in subsidiaries contradicts
the business model
of a global bank
or any internationally
active company,
and
constitutes a
significant restriction
on economic
freedom. Such
a regulation
would also
only materially
affect UBS.
Switzerland should
not enact
laws that
are tailored
to a
single company. The
reforms following
the financial crisis required certain banking
activities that had previously been carried
out in branches to
be outsourced to
subsidiaries in Europe
and the US.
However,
a global bank
is dependent on
extensive
international links in order to provide
customer services, including essential support for the Swiss
export
industry (e.g., loans and financing, foreign currency hedging,
payments).
The
Federal
Council's
proposal
would
represent
a
single-handed
approach
,
which
would
isolate
Switzerland
internationally.
Neither
the
Basel
standards
nor
competing
locations
have
such
extreme
requirements.
Contrary
to
the
description
in
the
explanatory
report,
the
UK
and
the
EU
also
have
significantly less stringent regulations compared to the Swiss
proposal.
The explanatory report identified various
alternatives to a full CET1
deduction
and assessed them as
effective. However, the
Federal Council
has rejected
these because
they do
not meet
the extreme
objective
of zero risk tolerance.
The proposal aims
to cover extreme
crisis scenarios in
ongoing business operations.
However,
systemically important
banks
develop comprehensive
recovery
and
resolution
plans
for
such
scenarios,
which are approved
by FINMA.
In addition, banks must
hold substantial incremental Tier
1 in
the form of AT1 and convertible debt.
The lessons learned from the Credit Suisse
crisis have shown that, on the one
hand,
existing regulations
must be
consistently implemented
and, on
the other
hand,
subsidiaries
must be
valued
conservatively
and
without
a
regulatory
filter.
This
would
have
made
Credit
Suisse's
parent
bank
substantially more
resilient.
There are significant differences in
the
cost estimates
. The study authored
by Prof. Zimmermann
in April
2025 shows
unrealistically low
cost implications.
The market
estimates the
costs to
be several
times higher
than the study. It is our investors and counterparties who determine the cost of capital for UBS and, as a
result,
for our clients,
and these differ considerably
from academic findings.
The large difference is mainly
due to the fact that, in the opinion
of the relevant market participants, more equity
capital does not lead
to lower borrowing costs. We
also see that the
major rating agencies consider the proposed
rules to be
potentially positive for
creditworthiness, but express
concerns about
their impact on
UBS's cost of
capital,
competitiveness, and
business model.
These considerations
are consistent with
those of
financial analysts.
Since
the
publication
of
the
Federal
Council
report
in
April
2024,
uncertainty
surrounding
potentially
excessive capital
requirements has
caused UBS's
market valuation
to underperform
banks in
Europe and
the US by
27% (approximately CHF
30 billion) through
the end of
December 2025.
For UBS shareholders,
this
represents
a
significant
destruction
of
value
in
addition
to
the
costs
of
integrating
Credit
Suisse
(approx. USD
14 billion).
The partial
recovery of
the share
price in recent
weeks due to
early December
speculation about
a possible
compromise confirms
the relevance
of regulation
for valuation.
However,
market
participants
remain
concerned
that,
although
UBS
would
report
very
high
capital
under
the
proposed
regulation, it
would not
be able
to use
that capital
productively and
would therefore
lose a
great deal of competitiveness.
The material additional costs resulting from the proposal would also place
a heavy burden on the
Swiss
economy
, as
UBS would
have to
partially offset
the additional
costs by
increasing prices
for loans
and
services in Switzerland. The
Federal Council's argument that
UBS would only
raise prices abroad
fails to
take into account that the requirements would be imposed in Switzerland
and that UBS would therefore
also have to hold the excess capital in its parent bank domiciled in Switzerland. This would happen in an
increasingly difficult credit
environment with higher refinancing
costs. Global economic challenges have
also led both the US and the UK to recognize that banking regulation
has gone too far and to announce
significant capital relief measures in order to provide the economy with additional
credit.
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 5 of 33
The SNB confirms that
banks' refinancing costs in the financial market
have risen and are having an
impact on lending. It mentions
that the costs on the
Swiss financing market may reflect an
adjustment in
UBS's risk
assessment of loans
to former Credit
Suisse clients, which
is confirmed by
UBS analyses. The
SNB
also
points
out
that
stricter
regulation
is
already
contributing
to
higher
refinancing
costs
in
the
domestic market. Global
banks with
access to
international capital markets,
such as
UBS, can
use their
more diversified
refinancing sources
in such
a market
environment to
help avoid
a credit
crunch in
the
Swiss market, even in a difficult economic environment.
The economic
impact should
be assessed
through a
thorough
regulatory impact
assessment
before
far-reaching
decisions are made.
According to
the authors’
assessment, the BSS
study published by
the
Federal
Council
does
not
meet
this
requirement.
The
responses
to
the
consultation
on
the
Capital
Adequacy Ordinance show that fears of negative effects across the
entire economy are widely shared.
Conclusion
: UBS
rejects the
full deduction
of foreign
subsidiaries from
CET1 capital,
as this
would be
disproportionate, not
internationally aligned,
and not
targeted. Furthermore,
the lessons
learned from
the
Credit Suisse crisis
would not be
adequately taken into account.
The proposal would
lead to significant
additional
costs
and
jeopardize
the
continuation
of
the
successful
UBS
business
model.
The
existing
regime,
if
applied consistently,
would
have
forced
Credit
Suisse
to
make
structural adjustments
much
earlier in order to ensure the company's survival.
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 6 of 33
1
2
1.
Introductory remarks
On April 6, 2024, the Federal Council presented measures to learn from the Credit Suisse crisis. On June
6, 2025, it presented
key parameters for
changes to laws
and ordinances and made
specific proposals for
changes to the ordinance relating to software, deferred tax assets, and regulatory valuation adjustments
(PVA),
as well
as AT1
instruments. These
were published
together with
an assessment
of the
potential
costs
and
benefits
by
Alvarez
&
Marsal
and
a
brief
expert
opinion
on
capital
cost
effects
by
Prof.
Zimmermann
.
Around
70
consultation
participants,
including
business
associations,
political
parties,
and
cantons,
submitted comments on the key parameters and specific
proposals for regulatory changes by September
29,
2025.
A
majority
of
the
comments
(around
60%,
see
Appendix
2)
emphasize
the
need
for
a
balanced
regulatory
package
and
do
not
consider
the
proposals
presented
to
be
sufficient
in
this
regard.
On September
26, 2025,
the Federal
Council published its
specific proposal
for the
amendment to
the
law on
the capital underpinning
of foreign
subsidiaries and opened
the consultation period
which runs
until January
9, 2026.
The Federal
Council also
published a
report,
which was
prepared by
the
consulting
firm BSS.
This
does not
adequately address
the Federal
Council's proposals
and does
not provide
any
tangible benefits.
The report
contains only
qualitative and sometimes
contradictory impact assessments
of selected measures and does not provide useful input for
a regulatory impact assessment.
This
consultation
response
covers
UBS's
position
on
the
Federal
Council's
capital-related
proposals
in
general and
the specific
proposal on
capital requirements
for foreign
subsidiaries in
particular.
For our
comments
on
the
regulatory
amendments
(software,
deferred
tax
assets,
and
prudential
valuation
adjustments), please refer to our
consultation response dated September 29, 2025
. A summary of
the key
points can
be
found in
section 2.1
of this
response. UBS
will
comment in
detail
on
the other
elements of the package of measures in future consultation
procedures.
1
Consultation responses on the amendment to the Capital Adequacy Ordinance
2
UBS consultation response on the amendment to the Capital Adequacy Ordinance
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 7 of 33
2.
Assessment of the package of measures
•
UBS
is
committed
to
strong
and
consistently
implemented
regulation
based
on
a
balanced,
internationally aligned package of
measures.
•
UBS
rejects
the
proposed
extreme
capital
measures,
as
they
are
neither
proportionate
nor
internationally aligned,
nor are they targeted,
because they do not adequately take into account the
lessons learned from the Credit Suisse crisis.
•
Alternatives that
have an equivalent
effect at lower
cost have not
been given adequate
consideration.
•
There
is
still
no
comprehensive
package,
and
there
is
no
sound
regulatory
impact
assessment;
moreover,
the capital costs are significantly underestimated.
•
The full deduction from
CET1 capital when capital
underpinning foreign subsidiaries at parent
bank
level
is
unnecessary
and
disproportionate;
it
would
lead
to
significant
additional
costs
and
would
jeopardize the continuation
of the successful UBS
business model. Furthermore,
the overall economic
impact has not been analyzed and quantified.
2.1.
UBS
statement
of
September
29,
2025,
on
amendments
to
the
Capital
Adequacy
Ordinance
Switzerland
already
has
one
of
the
strictest regulatory
capital
regimes
in
the
world
and
sanctions the
growth of
systemically important banks
with disproportionate capital
surcharges.
The Federal
Council's
proposals represent
an additional
package of "worst of"
regulations
, taken in
isolation from foreign
regulations, which overall result in a
significant deviation from the
Basel standards and the regulations of
competing locations (e.g., the EU, UK, and
US).
In
two
key
areas,
namely
the
treatment
of
foreign
subsidiaries
and
deferred
tax
assets
from
timing
differences (TD
DTA), Swiss
regulations even
exceed the
strictest regulations
of these
locations. In
addition,
Switzerland has already implemented the final Basel 3
standards earlier and more comprehensively
than
the EU, UK, and
US. Due to
the more extensive application
of the final Basel
3 standards, UBS
already has
to
hold
around
10%
more
capital
than
its
international
competitors
for
the
same
risks.
Despite
the
supposedly strict
UK regulations in
certain areas, a
comparable UK
G-SIB in Switzerland
would today have
substantially higher capital requirements applying the current Swiss regulations.
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 8 of 33
Figure 1: Proposed TBTF regime exceeds the strictest
international regulations
3
Highest
requirements
Deferred tax assets
due to temporary differences
Prudential valuation
adjustments
(PVA)
Foreign
participations
RWA
calculation /
implementation of
Basel III final
Capitalized
Software
Leverage ratio
requirements
Switzerland
–
proposed TBTF regime
EU
UK
US
Basel 3 Standard
Switzerland –current
TBTF regime
International
minimum
standards
Source: Own representation. Reading
example: The current
regulatory treatment of foreign
subsidiaries
in
Switzerland
(red
dotted
line)
is
slightly
less
strict
than
that
in
the
UK,
but
stricter
than
in
other
jurisdictions and
the Basel 3 standards. Under
the proposed TBTF regime (red
solid line), the regulatory
treatment
of
foreign
subsidiaries
in
Switzerland
would
be
the
strictest.
Note:
The
US
has
not
yet
implemented the final Basel III standards
but is already subject to significant
restrictions in the calculation
of RWA
(see Collins
Amendment). At
the same
time, the
US is
undergoing a
comprehensive review
to
simplify and reduce regulatory
requirements.
Given
the current
size of
UBS,
the proposed
measures would
mean that
the UBS
Group's
CET1
ratio
would not only be
significantly higher than that of
its competitors
but would also be
reported at
around 3.5
percentage points
too low
compared with
its competitors
, regardless
of how
efficiently
UBS manages
the parent bank.
This contradicts
the Basel Committee's
basic idea
that banks'
capital ratios
should be internationally comparable.
3
2% due to the amendments to the ordinance as proposed by the Federal
Council, approx. 1.5% due to B3f.
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 9 of 33
Figure 2: Comparison of capital requirements for
G-SIBs
4
5
6
~21%
~14%
~17%
~5%
Current
UBS
de-facto
minimum
Full
deduction
of foreign
subs
Future UBS
de-facto
mimimum
basedon
proposals
~19%
13.5%
12.5%
12.5%
12.3%
11.8%
11.8%
11.6%
11.6%11.6%
11.5%
11.5%11.5%
11.0%
10.9%
10.0%
8.5%
UBS
Peers
Peer average
11.5%
CAO proposals would merely create the
appearance of a lower CET1 capital ratio
Without Basel III finalization
impact
Source: Own representation,
data from peers based on available financial reports
The
costs
of
these
far-reaching
measures
would
severely
weaken
UBS's
competitiveness
both
domestically
and
internationally
and
impose
significant
additional
costs
on
the
Swiss
economy
in
an
already difficult environment. This
concern is also
shared by external
analysts and in
comments by experts
(e.g., Alvarez & Marsal
)
.
Under
the
applicable
regulations,
UBS
is
already
required
to
hold
around
USD
15
billion
more
capital
as part of the
emergency takeover of Credit Suisse
. This includes the progressive TBTF capital
surcharge of
around USD
6 billion,
which takes
into account
the larger
balance sheet
total and
higher
domestic market
share of
the combined
bank, as
well as
the elimination
of USD
9 billion
in regulatory
concessions
granted
to
Credit
Suisse.
However,
the
Federal
Council's
proposals
would
increase
the
additional capital requirements by a further
USD 24 billion, meaning that UBS would
have to hold a total
of around USD 39 billion in additional capital.
4
Pro-forma figures based on 1Q25 and assume proposed
measures are fully applied; assumes a static
countercyclical buffer and Pillar 2 add-ons; progressive
add-ons are based on expected levels of LRD (Leverage
Ratio Denominator) and market shares (phased in until 2030); LRD categories are
as proposed in the Federal
Council’s letter dated June 6, 2025. Given expected UBS AG capital ratio of 12.5-13.0% and UBS Group
AG
equity double leverage of ~100%,
and current UBS Group de facto minimum of 14%.
5
Based on available financial reports as of 9 January 2026, for publicly listed North American
and European G-SIBs
(Global Systemically Important Banks), excluding custodial banks; U.S. G-SIBs are assessed on a standardized
basis;
EU peers reflect Pillar 2 add-ons of 1.3%, based on the average value from the aggregated
results of the
EU Supervisory Review and Evaluation Process (SREP) 2024, published by the European
Central Bank, and is also
used as a proxy for UK competitors
6
Alvarez & Marsal (2025): Analysis of the costs and benefits from proposed changes
to the regulatory capital
treatment of participations in foreign subsidiaries of Swiss-based SIBs.
Consultation on amendments to the
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Page 10 of 33
Figure 3: USD 39 billion additional capital requirement
due to Credit Suisse acquisition and tighter
regulations
7
8
Compensation for
regulatory
concessions, e.g.,
elimination of the
regulatory filter
Progressive
TBTF component
Required additional
capital due to
existing regulations
Required additional
capital based on
capital
proposals
Total additional
capital required
~24
~15
~39
~6
~9
Acquisition of Credit Suisse
Regulatory
proposal
Total
Source: Own representation
2.2.
Important developments since the Opening
of the consultation
The
comments
published by
the
Federal
Department of
Finance
(FDF)
on
October
15,
2025,
on
the
proposed amendments
to the
Capital Adequacy
Ordinance
show that
UBS is
not alone
in having
serious
concerns
about
the
disproportionate
nature
of
the
proposed
requirements.
All
business
associations, the
financial sector, cantons with
strong financial centers,
and all business-orientated
parties
reject the Federal Council's proposals for the full deduction of software and deferred tax
assets, either in
full or at least in the
majority.
Approximately 75% of the parties participating in the
consultation clearly
indicated that the proposals should be reviewed. The
costs of the proposed regulation should not have a
disproportionate
negative
impact
on
Switzerland
as
a
banking
center
and
the
economy
as
a
whole.
Furthermore, many comments criticize the lack of an overall view and international
alignment, as well as
the lack of differentiation
between capital underpinning in ongoing
business operations (going concern
principle) and the funds necessary for resolution (gone
concern).
On November 4 and 13,
the
Economic Affairs and Taxation Committees of the Federal
Parliament
(WAK-N and
WAK-S)
wrote two separate
letters
to the
Federal Council in
which they acknowledged
the need for measures to be
taken, but at the same time
demanded that the entire package
of measures
should
not
go
beyond
international
standards.
Both
committees
recommend
that
the
treatment
of
deferred tax
assets arising
from timing
differences and
software be
aligned with
the relevant
EU directives.
7
The reduction in the progressive TBTF component from
approximately CHF 9 billion to approximately CHF 6 billion
due to new information from FINMA at the end of September leads to a reduction
in the additional total capital
requirement to approximately CHF 39 billion compared
to the original estimate of approximately CHF 42 billion.
8
Letters from the WAK-N and WAK
-S
Consultation on amendments to the
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Ordinance
Page 11 of 33
9
10
Figure 4: Expected impact of adjustments to
capital requirements in peer jurisdictions
11
(19bn)
+6bn
+24bn
(138bn)
USD
USD
EUR
USD
While Switzerland
intends to
significantly tighten capital
regulations, its
main competitors
are currently
simplifying or relaxing
their regulations.
Alvarez & Marsal
(A&M)
, which prepared
an expert opinion
for
the Federal
Council in
June 2025,
points out
in its
report
dated October
13, 2025,
that Switzerland's
proposals to
tighten capital
requirements stand in
sharp contrast
to developments
in competing
locations.
They point out
that deregulation
in the US
will release USD
138 billion of
CET1 capital
(14% of total
CET1
capital of
all banks).
This is
expected to
create additional
lending capacity
for the
economy and
capital
market activities estimated
at USD 2.6 trillion.
The UK regulatory authorities
are following the US
and will
reduce
the
Tier
1
minimum
capital
requirements
from
14%
to
13%
from
2027
in
order
to
create
additional
lending
capacity
for
the
economy
and
support
growth.
The
Bank
of
England
made
a
corresponding announcement
on December 2,
2025.
In the EU,
the focus has
so far been
on simplifying
regulatory requirements. Switzerland's plans for a stricter
TBTF capital regime are moving in the opposite
direction, with negative consequences for the Swiss
economy,
the international competitiveness
of Swiss
banks, and the Swiss financial center. These aspects must also be taken into account in a comprehensive
cost-benefit analysis.
Source: Own representation, Alvarez & Marsal
In June and
October 2025,
Standard &
Poor's (S&P)
expressed concerns about UBS's
competitiveness
and capital costs as a result of the
implementation of the current proposals: "
On a pro forma basis, and
absent mitigation,
the proposed
amendments could
lead the
UBS Group
to pile
up additional
CET1 capital
of up to
$24 billion (according
to the bank's
estimate). This might
increase UBS's cost
of capital
and
potentially
place it
at
a
significant competitive
disadvantage
both
globally and
domestically
."
and
"
Stronger capitalization is usually supportive of credit ratings, but only
if banks can concurrently operate
a
sustainable business model
."
9
Alvarez & Marsal (2025): "Bank deregulation primer; US-led bank deregulation
wave begins under Trump
administration," October 2025
10
Bank of England (2025)
11
Standard & Poors (A. Lozmann, B. Heinrich), "Debate To
Enhance Regulation After Credit Suisse Enters The Next
Phase, Leaving Most Questions Open For Now," October 2025
Consultation on amendments to the
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12
13
14
15
On September 26, 2025,
the Federal Council published a
study by the consulting
firm BSS
, which
was
intended
to
contribute
to
the
regulatory
impact
assessment.
The
study
deals
with
the
Federal
Council's proposals
inadequately and
provides no
tangible benefits.
Neither is
the effectiveness
of the
measures assessed in a well-founded
manner,
nor are the costs of the
Federal Council's proposal and
the
alternatives analyzed appropriately.
The study selectively summarizes existing literature and the
opinions
of
only
eight
experts,
several
of
whom
are
well-known
advocates
of
stricter
banking
regulation.
Accordingly, it provides one-sided arguments in support of the proposal for the full deduction of foreign
subsidiaries. In
order to
underline the
importance of
the proposed
measure, the
effectiveness of
other
major measures such as strengthening AT1 capital,
recovery and resolution planning (RRP)
and corporate
governance was dismissed. The BSS
study contains only qualitative and
sometimes contradictory impact
assessments of selected measures with regard to the objectives of financial market
stability, ensuring the
maintenance
of
systemically
important
functions
in
a
crisis,
and
avoiding
state
aid.
Other
regulatory
objectives such as proportionality or the impact on the Swiss financial center are not taken into account.
In an
article published
on November
28, 2025
Professor Martin
Janssen also
criticized the
study, accusing
it of lacking objectivity and providing insufficient analysis.
The
mandatory
regulatory
impact
assessment
(RIA)
for
the
proposed
banking
regulation
is
not
available. The RIA
is an instrument for
ex-ante analysis and
presentation of the
economic impact of
the
federal government's legislative proposals. It is intended to create transparency about the
effects of new
regulations and
to identify possible
alternatives. In this
way,
it provides
political decision-makers with
a
fact-based
basis
for
decision-making.
According
to
the
Federal
Council's
guidelines,
RIA
work
should
begin early in the legislative process and the findings should contribute to
the optimization of regulation
during the drafting
of the legislation
. An RIA
focuses on
five
points: (
i
) the necessity
and possibility of
government action; (ii)
alternative courses of
action; (iii) impact on individual
social groups; (iv) impact on
the economy as a whole; and (v) appropriateness of implementation.
To
our knowledge,
only work on
the assessment point
"impact on the
economy as a
whole" has been
published separately
to date
(study
by
BSS
). In
addition, as
explained above,
this BSS
study is
insufficient
in terms
of both
content and
methodology
to serve
as a
basis for
assessing the
potentially far-reaching
effects on the economy
as a whole. In
order to provide
a more meaningful basis
for decision-making, a
more thorough examination of alternatives is needed. The existing documents do not coherently explain
why
other
options
–
even
though
less
intrusive
measures
would
have
been
possible
to
achieve
the
objectives –
were not
pursued at
the beginning of
the legislative process.
An analysis
of the
impact on
individual social groups (including UBS) and an appropriate basis for assessing the economic implications
of the proposed measures are also required.
12
Study by consulting firm BSS
13
Finews guest article by Prof. Martin Janssen
14
Page 4, Regulatory Impact Assessment (RIA) Manual of
the Federal Department of Economic Affairs,
Education and Research. Version
2.0. (April 1, 2024).
15
BSS Economic Consulting. Contribution to a regulatory
impact assessment: Effects of TBTF regulation.
September 11, 2025.
Consultation on amendments to the
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Page 13 of 33
16
17
18
3.
Assessment of capital requirements for foreign subsidiaries
•
UBS supports a strong and credible
capital regime for Switzerland. The proposal for a
full deduction
from Common
Equity Tier
1 (CET1)
capital is
neither proportionate
nor internationally
aligned and
does not adequately take into account the
lessons learned from the Credit Suisse crisis.
•
Between 2020 and
2022, Credit Suisse's
parent bank had
to take heavy
losses due to
extensive write-
downs
on
foreign
subsidiaries.
These
were
the
result
of
an
unsustainable
strategy,
aggressive
valuation
of
foreign
subsidiaries,
and
the
regulatory
filter.
In
addition,
unlike
UBS,
Credit
Suisse's
parent bank had
built up
the capital
underpinning of
its subsidiaries
under the
regulations at
the time,
making full use of the 10-year transition period
(full implementation in 2028).
•
The
proposal
for
full
deduction
does
not
take
into
account
the
difference
between
capital
underpinning in ongoing
business operations,
an extreme crisis,
and possible recapitalization
through
the conversion
of debt.
Furthermore, a
full write-off
of all
foreign subsidiaries
in ongoing
business
operations is an unrealistic scenario.
•
The
explanatory
report
lists
various
effective
alternatives.
However,
the
bar
for
assessing
the
alternatives
was
set
so
unrealistically
high
that
only
a
full
deduction
–
as
an
extreme
variant
–
represents a viable option, without due consideration of the associated
costs.
•
The complete insulation of the
parent bank's Common
Equity Tier 1 (CET1) capital
from changes in
the
value
of
foreign
subsidiaries
also
contradicts
the
business
model
of
an
internationally
active
company.
A
group
as
a
whole
benefits
from
the
earnings of
its
international business
units.
This
diversification also increases the resilience of the entire group.
•
As part of its
recovery and resolution
planning,
UBS must also
maintain significant
buffers in the form
of debt convertible into equity
(approx. USD 100 billion in bail-in
bonds), which is available
to absorb
extreme losses.
3.1.
Lessons
learned
from
the
Credit
Suisse
crisis
regarding
the
treatment
of
foreign
subsidiaries
The capital underpinning
of foreign subsidiaries
should take appropriate
account of the lessons
learned
from the
Credit Suisse crisis.
The significant
write-downs on
foreign subsidiaries
in the
years 2020
to 2022
resulted from
aggressive valuation
based on overly
optimistic discounted cash flows
despite negative
trends in the business and financials.
This was confirmed both by the PUK
based on the expert opinion
of Prof. Birchler
and by FINMA
. In addition, Credit Suisse's
parent bank had insufficient capital
due to
regulatory
concessions.
The
regulatory
filter
led
to
an
artificial
increase
in
the
parent
bank's
Common Equity Tier 1 (CET1)
capital,
and the 10-year transition
period for the capital
requirements,
which masked the urgency of the situation, resulted
in an insufficient capital underpinning.
16
PUK report
(2024, p.
8): "The
audit firm
commissioned by
FINMA to
verify the
market value
calculations of
the
Parent Bank's subsidiaries identified a substantial overestimation
of market values (fair value) by CS AG at the end
of 2019 and in mid-2021."
17
Birchler
expert
report
(2024,
16):
"When
it
introduced
the
filter,
FINMA
made
its
application
contingent
on
obtaining a second opinion on the value of
the investments. It therefore commissioned
the auditing firm BDO AG
twice –
at the
end of
2019 and
in mid-2021
– to
review
CS's valuation
of the
subsidiaries. In
both cases,
BDO
found that CS had substantially overestimated the fair values."
18
FINMA report, Lessons
Learned from the CS
Crisis (2023, p. 60):
"Changes in earnings prospects,
for example as
a result of adjustments to business activities or restructuring, had a significant impact on market values and thus –
in the case of value adjustments – directly on the parent bank's equity."
Consultation on amendments to the
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Figure 5: Effect of aggressive valuation and regulatory
concessions
Figure 6: Credit Suisse AG's foreign subsidiaries
(CHF billion)
Credit Suisse AG
Aggressive Valuation
(DCF)
Phase-in of
requirements
Regulatory filter
15
6
Dec ‘19
Dec ‘22
Write-down:
-45
(-63%)
72
27
Overvaluation due to
regulatory filter
Overvaluation
due to
regulatory filter
Source: Own representation
Aggressive valuation and
regulatory concessions
meant that
Credit Suisse AG (parent
bank) had to
record
a
loss in value of CHF 45 billion
(-63%) on its foreign subsidiaries between 2020
and 2022.
Source: CS regulatory disclosures.
Early
implementation
of
the
current
regime
and
conservative
valuation
of
subsidiaries
would
have
significantly increased Credit Suisse's resilience
and also enabled timely restructuring.
Consultation on amendments to the
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3.2.
Assessment of the Federal Council's
proposal and the rejected alternatives
3.2.1.
Assessment of the full deduction of foreign subsidiaries
from Common Equity Tier 1
(CET1)
The Federal Council proposes full deduction of
investments in foreign subsidiaries from Common Equity
Tier 1 (CET1)
capital in order to
strengthen the parent bank in
Switzerland and protect
it completely from
possible write-downs of its international
subsidiaries.
UBS rejects this proposal for the following reasons:
●
A
full
CET1
deduction
is
not
targeted
,
as
it
would
indiscriminately
disadvantage
international
activities. The goal
of ensuring that
any losses in
the book values
of foreign subsidiaries
do not affect
the parent
bank's CET1
capital in
any scenario,
no matter
how unlikely, is extreme
because it
assumes
not
only
zero
risk
tolerance
but
also
a
completely
unrealistic
scenario.
The
insulation
of
foreign
subsidiaries also
contradicts the
business model
of an internationally
active company, where business
and
geographical diversification
reduces
the risk
of a
simultaneous and
complete loss
of value
of
foreign operations.
●
Based on the UBS financial
figures for the first quarter of
2025, which were also used
by the Federal
Council, the proposal would lead to additional capital
requirements of approximately USD 23 billion
(approximately 1/3 additional
Common Equity Tier
1 capital,
CET1). We estimate the
net annual cost
of
this
additional
capital
at
approximately
USD
1.7
billion,
which
is
why
the
proposal
is
also
disproportionate
. A sufficient cost/ benefit analysis has not been carried
out.
●
A full CET1 deduction would also
not be internationally aligned
and would therefore be a Swiss
solo effort.
There are
no relevant
competing financial
centers that
apply a
full CET1
deduction to
foreign subsidiaries.
In the
EU and the
UK – contrary
to the
explanations in
the Federal
Council report
– CET1
investments in subsidiaries
are underpinned with
a risk
weighting of 250%
up to 10%
of
the
parent
bank's
Common
Equity
Tier 1
(CET1)
capital and
do
not
have
to
be
deducted
in
full.
Furthermore, no
global standard
and no
major jurisdiction
require a
full deduction
of AT1 investments
in foreign subsidiaries from
the parent bank's CET1.
In addition, both the authorities in
the EU and
the UK grant
their banks extensive exemptions
(e.g., the EU
does not generally require
compliance
with
this
requirement)
or
relief
(e.g.,
the
UK
has
significantly
lower
capital
requirements
on
an
unweighted basis, i.e., leverage ratio).
3.2.2.
Assessment of the alternatives rejected
in the explanatory report
The explanatory report rejects
all of the alternatives
listed as insufficiently effective
because they do not
completely insulate the parent bank's Common Equity
Tier 1 (CET1) capital.
The assessment did not take
into account the costs associated with
the
extreme requirement
, the impact on the bank's competitive
position and profitability, or the instruments of recovery and resolution planning (RRP).
The Federal Council's proposal
attempts to address
the lessons learned by
moving
from one extreme,
with very far-reaching regulatory concessions in the case of Credit
Suisse,
to another extreme
,
proposing to eliminate all
risks regardless of cost.
The current capital regime
for foreign subsidiaries has
a balanced cost/benefit ratio. In principle,
therefore, no adjustments to the system are necessary.
Consultation on amendments to the
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Figure 7: Capital underpinning of foreign subsidiaries
– cost/ benefit perspective
19
Capitalization of foreign subsidiaries
based on cost / benefit
Credit Suisse
with concessions:
Regulatory filter,
aggressive valuations
and long phase-in
periods
Federal Council proposal
Full CET1 deduction
Current
regime
(UBS)
Conservative
valuations
(appliedto
current
400% risk weightings)
Symmetric
deduction
Tier 1
deduction
80 % Tier 1
deduction
Negative cost / benefitBalanced
cost / benefit
Source: Own representation
The explanatory report lists the following alternatives:
●
The
symmetrical deduction of CET1 and AT1
provides for a deduction of subsidiaries in the form
in which the subsidiaries receive the capital.
This proposal represents a very far-reaching
regulation.
Although the UK and EU have similar rules, these are not
applied in practice in the EU due to legally
regulated exceptions.
In the
UK, they
are more
than offset
by very
far-reaching
concessions in
the
unweighted capital requirements.
●
A
(partial)
deduction
from
Tier
1
provides
for
the
capital
underpinning
of
foreign
subsidiaries
based
on
the
applicable
Swiss
capital
regime.
With
a
full
deduction,
these
would
be
backed
by
approximately three-quarters
of Common
Equity Tier
1 (CET1)
capital and
one-quarter of
AT1 capital.
With a partial deduction of 80%, 58% of foreign subsidiaries would be backed by
Common Equity
Tier 1 (CET1) capital and 22% by AT1
Tier 1. Building up this additional CET1 capital would involve
significant costs.
●
The
partial use of bail-in bonds
to cover risks from investments in foreign subsidiaries recognizes
the potential of convertible debt to recapitalize the group in a resolution, which would facilitate the
restructuring and repositioning of the group.
This is also recognized by FINMA.
●
Increasing
the
risk-weighting
of
foreign
subsidiaries
would
also
be
an
effective
measure
to
strengthen the
parent bank's
capital. The
authorities' concerns that
risk weighting
would result
in
the
reporting
of
the
parent
bank's
Tier
1
at
a
level
which
is
too
high,
thereby
undermining
the
effectiveness of
the leverage
ratio as
a risk
management instrument,
could be
addressed
through
various measures.
19
See consultation response/
blog by Orbit36 dated December 11, 2025
Consultation on amendments to the
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●
The use
of different capital requirements for wealth management and investment banking
units
is intended to reflect the different risks associated with
these business activities.
However,
this
alternative does not take into account the fact that diversification across different business activities
is important for a stable
business model. Capital requirements
should therefore be based not
(solely)
on the allocation to a business unit, but on
the objective risk profile.
●
An
alternative valuation
approach for subsidiaries based
on net book value
(i.e., net value of
assets and
liabilities, without
taking into
account any
goodwill) would
consistently provide
a very
conservative
valuation.
This
would
ensure
that
only
actual
gains
and
losses
are
included
in
the
valuation instead of
profit forecasts. As explained
in the explanatory
report, this not
only reduces the
risk of
a very
high valuation
loss in
a crisis
but also
means that
the net
book value
roughly corresponds
to
the
subsidiary's
equity.
This
in
turn
means
that
losses
in
a
subsidiary
would
have
a
consistent
impact
on
the
parent
bank
and
group.
This
would
also
greatly
reduce
significant
valuation
fluctuations and write-downs.
3.2.3.
Comparison of the effectiveness of the measures
The alternatives
should be
subject to an
appropriate cost-benefit
analysis. In
the table below, we
compare
the
capital coverage and effectiveness
of selected alternatives.
Table 1 shows that no adjustments
are necessary in principle.
However, the Credit Suisse crisis has
shown
that a
conservative valuation
of
subsidiaries
contributes significantly
to stability
and reduces
large
valuation fluctuations and write-downs.
The table also shows
that the
alternatives
chosen by the Federal
Council lie between
the current regime
and a full CET1 deduction in terms of capital
adequacy and additional capital accumulation.
As the table
shows,
the Federal Council's
proposal for a
full CET1 deduction
clearly does not
meet
the criteria
and would
lead to
estimated additional
annual costs
of USD
1.7 billion
as a
result
of the
significant capital accumulation of USD 23
billion.
The
alternatives
identified
by
the
Federal
Council
(see
3.2.2.)
should
be
evaluated
in
terms
of
impact/benefit and
costs. In
doing so, the
degree of effectiveness
to be achieved
should be
clearly defined
and the
principle of necessity
applied (i.e., no
unjustified zero risk
tolerance). The
identified alternatives
should
be
assessed
on
this
basis
and
their
degree
of
effectiveness
evaluated.
The
alternatives
that
ultimately
achieve the
necessary degree
of
effectiveness should
then
be
subjected to
a
thorough
cost
review.
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Table 1: Effectiveness of alternatives (1Q25
20
)
21
22
23
Additional capital
requirement
(USD billion)
-
-
17%
67%
Tier 1
deduction
+
Symmetric
deduction
-
-
We would also like to draw attention
to the
macroeconomic impact
of excessive capital requirements.
While
insufficient
capital
requirements
lead
to
high
macroeconomic
costs
caused
by
banking
crises,
excessive requirements also result in high costs
in net terms:
the economy as a whole must
expect higher
financing costs throughout
the economic cycle
if capital requirements
lead to
a credit
crunch or higher
borrowing costs. Reduced
profitability in
the banking sector
due to
excessive requirements
weakens its
resilience. Excessive requirements also make it impossible for banks to continue supporting the economy
in
times
of
negative
economic
conditions,
which
can
exacerbate
economic
downturns.
A
solid
and
comprehensive cost-benefit
analysis at
the level
of the
banking sector
and the
economy as
a whole
is
therefore essential.
20
Pro
forma figures
are
based
on the
first quarter
of 2025
and assume
that the
proposed
measures
will be
fully
implemented. The additional net CET1 requirement was calculated without the
surplus above the lower end of the
guidance range of
12.5–13% for the first
quarter and adjusted
for expected repayments
of approximately USD
5
billion, resulting in a reduction in risk-weighted
assets of around USD 20 billion,
which would release around USD
2.5 billion in CET1
capital, which is
then expected to be
transferred to UBS Group
AG (see UBS media
release dated
June 6, 2025). AT1 assumes that the total regulatory AT1 capacity of 4.3% of risk-weighted assets will be utilized.
21
The additional capital build-up will result in additional annual capital costs.
22
The Tier 1
deduction distributes the deduction of
foreign subsidiaries proportionally between CET1 capital and
AT1
instruments, based on an assumption of max. AT1
based on the existing capital adequacy regulations.
23
The
symmetrical
deduction
follows
the
strict
UK
approach
(without
exemptions):
AT1
instruments
invested
in
foreign
subsidiaries
are
deducted from
the parent
bank's
AT1,
while
the remainder
of the
value
of the
foreign
subsidiaries is deducted
from CET1
capital. The UK
approach also allows
subsidiaries of up
to 10% of
the parent
bank's CET1 to be risk-weighted at 250%.
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 19 of 33
24
25
4.
Recovery and resolution is key for financial
stability
•
The TBTF regime
includes instruments
across the entire
crisis continuum
to provide optimal
protection
for
taxpayers.
The
capital
regime
must
take
into
account
the
crisis
continuum
with
recovery
and
resolution planning
.
•
In September 2025, FINMA confirmed that
the preferred resolution strategy for UBS is credible.
•
The recovery plan
offers management
a range of
capital and
liquidity measures
to restore the
Group's
solid financial footing in a crisis.
•
AT1
instruments are
central in
the recovery
phase.
UBS agrees
with the
Federal Council
that these
instruments should
be further
strengthened, in
particular by
aligning them
with the
practices followed
in the EU and the UK.
•
In a resolution, new
capital is created to
stabilize the entire group
by converting approximately USD
100 billion of convertible debt and, if not already used in the recovery phase,
approximately USD 20
billion of AT1 instruments.
4.1.
Loss-absorbing capacity (TLAC) covers
the entire crisis continuum
Central to
the parent
bank's resilience
is a
sustainable
,
profitable business
model
that allows
it to
absorb losses
during ongoing
operations and
raise additional
funds on
the capital
market if
necessary.
Extreme losses are
managed through
recovery and resolution
measures
, for which
additional financial
resources are available.
A
100%
loss
of
all
foreign
subsidiaries
while
continuing
business
operations
is
unrealistic
.
Nevertheless,
this
scenario appears
to
underlie
the
proposal
in
the
explanatory report,
which
requires
foreign subsidiaries
to be
fully deducted
from Common
Equity Tier
1 (CET1)
capital.
The group
would
have to be able
to absorb extreme losses
from foreign subsidiaries as
part of its recovery plan
with capital
measures, if necessary also with
the use of AT1
capital.
In all alternatives,
the group's CET1 ratio
would
fall below
the level
of the
parent bank
at the
latest when
foreign subsidiary
valuation losses
reached 50%.
In the case
of a full
CET1 deduction,
this would already
occur after a
loss of 20%.
Once the Group's
CET1
ratio is lower than
that of the parent
bank no additional risk protection
is required for
the parent bank,
as the Group's
CET1 ratio
determines when
capital measures
are necessary, including the
implementation
of the recovery plan.
In an extreme
crisis scenario,
the
Swiss resolution
regime
comes into
play. Systemically important
banks
must
support
FINMA in
developing credible
recapitalization
and
restructuring
plans.
This
also
includes
building up
substantial debt
capital
that can
be
converted into
equity if
necessary (bail-in
bonds).
The
amount of Common Equity Tier 1 (CET1) capital is set at a level that can absorb losses
under high stress,
but not
extreme losses.
The AT1
component and
bail-in bonds
mentioned above
are
intended for
this
purpose.
24
The
Law
and
Ordinance
use
the
terms
"Recovery"
and
"resolution"
to
describe
the
internationally
used
term
"resolution." In
its "key points"
of June 6,
2025, the Federal
Council proposes
replacing the term
"Recovery" in
the Banking Act with
"resolution" in order to distinguish it
from Recovery under private law. In
this sense, the term
"resolution" is used here to refer to resolution.
25
The calculations are based on an assessment of the subsidiaries on the basis of their net book value.
This means
that losses in subsidiaries have a similar impact on UBS AG and UBS Group. For more
information on the
mechanics,
see also the statement by Orbit36, page 35, Fig. 4.
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 20 of 33
Figure 8: Model for recovery and
resolution
26
CET1
75bn
AT1
20bn
Bail-in
Bonds
104bn
~200 bn
3Q25
Going and gone concern
capital overviewUBS –Total
Loss
Absorbing Capacity
in USD
Business as usual
Resolution
Recovery
Leading Swiss
capital requirements
enable high loss
absorption in
ongoing business
operations
Triggering measures
in relation to AT1
instruments enable
stabilization in an
extreme crisis
FINMA deems the
bank to no longer
be viable,
recapitalization is
carried out by
converting debt
capital (bail-in
bonds) and
subsequent
restructuring
Going Concern
Gone Concern
FINMA concluded
that UBS remains
resolvable under
existing preferred
resolution strategy
Source: Own representation
Figure 8 shows
the Group's available capital
in ongoing operations (going
concern,
CET1 and AT1)
and
in liquidation (gone concern,
bail-in bonds). If the stabilization measures are insufficient, i.e., if
the bank
is unable to stabilize itself and is deemed by FINMA to
be no longer viable,
bail-in bonds
provide access
to extensive debt capital that can be converted
into equity capital.
FINMA's preferred
resolution strategy
for UBS
is based
on a
single point
of entry
bail-in,
which provides
new capital to stabilize the entire group.
4.2.
Recovery and effectiveness of AT1
The
recovery plan
offers management
a range
of capital
and liquidity
measures to
stabilize the
bank
financially in a
crisis. AT1
instruments are central to
this. UBS agrees
with the Federal Council
that their
effectiveness can be further enhanced
.
The
Expert
Group
on
Banking
Stability
recommended
aligning
AT1
regulation
with
international
practice.
The regulations
in the
EU and
the UK
provide
for the
suspension of
interest
payments if
a
certain capital ratio is not met. Unlike
the cumulative loss test for four quarters
proposed by the Federal
Council,
this predefined capital
ratio (e.g.,
falling below
the minimum
requirements) provides an
objective
benchmark that is consistently based on the bank's
capital strength.
26
See Expert Group on Banking Stability (2023, p. 75): "The FDF,
together with FINMA and the industry,
should
examine how the Swiss market for AT1 instruments
can be rehabilitated. The focus here is on a clear and
internationally understandable design of the instruments."
Consultation on amendments to the
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Ordinance
Page 21 of 33
27
Figure 9: Restructuring is central to resolution
Bank prior
to crisis
Restructured
bank
Assets
Assets
Resolution
Stabilization through conversion
of
~
100bn TLAC debt
and
~
20bn AT1
into equity and
restructuring the bank
Swiss Bank
Wealth
Manager
Global
integrated
bank
Illustrative only
Such a solution is acceptable
to AT1 investors because they already have
to expect interest payments
and
bond
repayments
to
be
suspended
if
certain
capital
requirements
are
not
met.
At
present,
they
are
dependent
on
the
assessment
and
judgment
of
the
bank's
management/board
of
directors
and
the
supervisory authorities as
to when which measures
will be triggered. A
predefined capital ratio eliminates
discretionary leeway
and thus also largely
reduces the potential stigma
effects of suspending interest
payments. Such a regulation would align the Swiss
regime with international standards.
4.3.
Resolution
The
resolution
of
banks
is
basically
comparable
to
restructuring
in
other
industries
.
Systemically
important
banks
must
also
prepare
and
test
comprehensive
recovery
and
resolution
plans
so
that
recapitalization and restructuring can be implemented
quickly and the bank can continue to operate.
The preferred resolution strategy focuses on the parent company, in the case of UBS, on UBS Group AG,
through which
recapitalization would
be carried
out by
converting debt
capital earmarked
for this
purpose
into
equity
capital.
This
would
provide
new
capital
to
stabilize
the
entire
group
through
the
conversion of approximately USD
20 billion in
AT1
instruments (if not already
used in a
recovery phase)
and approximately USD
100 billion in
bail-in bonds. The
recapitalized bank would
have a very
high capital
ratio
and
could
thus
absorb
extraordinary
losses.
The
Public
Liquidity
Backstop
(PLB)
would
ensure
sufficient liquidity during the restructuring
phase if the bank were
temporarily unable to obtain liquidity
directly from the market.
Due to the
very high capitalization
and the restructuring
plan to be approved
by
FINMA in such a scenario, taxpayers would be
largely protected from default risks.
FINMA
reconfirmed the
credibility of
the preferred
resolution strategy
in September
2025
.
The following
figure shows
the key
components of
this strategy,
including recapitalization
through the
conversion of
designated debt (bail-in bonds) and the subsequent
restructuring of the bank.
Source: Own representation
27
FINMA resolution reporting UBS
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 22 of 33
Under
the
guidance
of
FINMA,
UBS
is
developing
alternative resolution
strategies
that
reflect
the
lessons learned
from the Credit
Suisse crisis.
In contrast
to the preferred
resolution strategy, the aim is
not
to continue operating the bank, but to achieve an orderly exit from the market by selling all parts of the
company and liquidating those parts that cannot
be sold. The group remains solvent at all times and can
therefore be wound down in a controlled manner.
The bank's
recovery and resolution planning
and the additional capital buffers (AT1)
and convertible
debt
(bail-in
bonds)
to
be
held
for
this
purpose
must
be
taken
into
account
when
determining
the
additional measures for the capital underpinning of
foreign subsidiaries.
Consultation on amendments to the
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Ordinance
Page 23 of 33
5.
Economic impact of the proposal
●
UBS's
strategy
is
based
on
two
pillars:
the
Swiss
domestic
market
and
the
international
wealth
management
business
with
private
and
institutional
clients,
in
which
Switzerland
still
occupies
a
leading position
internationally. Our focused investment
bank helps us
to offer services
tailored to the
needs of our Wealth Management clients worldwide
and corporate clients in Switzerland.
●
Contrary to the description
in the explanatory report,
capital costs also have
a significant impact on
UBS's Swiss activities,
as UBS – like any cross-border
company – manages its balance sheet, income,
and costs globally, and the new requirements apply in Switzerland.
●
Additional
capital
costs
would
lead
to
higher
borrowing
and
service
costs
for
all
clients
–
private
clients, corporate clients, banks – including in
Switzerland, and to an overall reduction
in the supply
of credit.
●
According to the Swiss National Bank (SNB),
refinancing costs for Swiss banks have
risen significantly
in recent months,
leading to more expensive credit for households
and businesses. In addition, this
is
likely to
result not
only in
higher prices,
but also
in a
shortage of
supply, given the
ongoing refinancing
gap at numerous local banks.
●
The
proposed
regulation
would
also
further
distort
competition
in
Switzerland in
favor
of
foreign
banks.
EU
banks
in
particular
can
offer
loans
through
Swiss
branches
of
their
Parent
banks
at
conditions based on the significantly lower EU capital
requirements.
Swiss banks, on the other hand,
cannot offer lending business through branches in the EU.
●
Since
the
publication
of
the
Federal
Council
report
in
April
2024,
uncertainty
due
to
potentially
excessive capital requirements has led to a
significantly worse market valuation of UBS compared
to
banks in Europe
and the US,
resulting in significant
value destruction
for UBS shareholders
in addition
to the costs of integrating Credit Suisse.
5.1.
Impact on Swiss clients
The
explanatory report
argues that
additional capital
costs
would
only affect
foreign
subsidiaries. This
assumption is
incorrect; additional
costs resulting
from substantially
higher capital
requirements would
also
impact
Swiss
activities
,
as
the
capital
adequacy
requirements
must
be
met
by
the
parent
bank
domiciled in
Switzerland. The
additional costs
must be
borne by
the entire
UBS Group
,
including UBS
Switzerland AG.
Additional capital costs would lead to
higher credit and service costs
for all clients, including those in
Switzerland, and
to an
overall shortage
of credit.
UBS's total
lending volume
to Swiss
households and
companies currently amounts
to around CHF 350
billion.
This amount underscores
UBS's role in
financing
the economic cycle
in Switzerland. In
addition,
many essential services
for Swiss clients
are provided
by
international subsidiaries
and branches. This
includes access to
international capital
markets and payment
transactions,
products
to
hedge
payment
and
currency
risks,
and
support
for
around
8,000
Swiss
corporate
clients
in
their
international
business
,
e.g.,
the
export
of
goods.
UBS
offers
its
Swiss
corporate clients
local services
and loans
at its
international locations
in
the US,
Europe,
and Asia.
An
increase in costs
would reduce
UBS's competitiveness
vis-à-vis local
banks abroad.
SME clients
would then
have to establish
new relationships with local
banks. This is
often difficult for
SMEs that are
not known
internationally.
Alternatively,
these
companies
would have
to
accept
higher
credit
costs,
which
would
make international expansion even more difficult for
these clients.
Consultation on amendments to the
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Ordinance
Page 24 of 33
Figure 10: Development of credit volume and
increasing funding in the capital market
28
In
interbank business
, most of
the 230 domestic
Swiss banks
use UBS to
access foreign
markets, as
they
do
not
have
their
own
international
network.
The
Swiss
economy
has
an
export
share
of
70%,
and
according to
Swissmem, this
figure is
as high
as 80%
for SMEs.
Domestic banks
therefore also need
access
to
international financial
markets
for
their
SME business.
In
interbank
business, they
use
UBS's
global
network to access international payment
systems, foreign exchange markets, securities transactions,
and
custody
and
depository
services.
Due
to
its
size
and
financial
strength,
UBS
makes
a
substantial
contribution to the
Swiss financial market
infrastructure and generates
around one-third of
the volume
that runs through the platform of the stock exchange
operator SIX. In addition, following the acquisition
of
Credit
Suisse, UBS
is
the only
remaining
Swiss
bank
licensed
by
the US
authorities to
process
USD
transactions and can
therefore offer
a key service
to other Swiss
banks. UBS is
also the global
leader in
Swiss franc clearing, with
a market share of 75%.
Domestic banks prefer a Swiss
bank that is both
locally
anchored and globally active as a reliable partner for their foreign and
interbank business.
Source: SNB
In its
report "
Bank funding
costs
"
(November 13,
2025), the
SNB
confirms that
banks' refinancing
costs on
the financial
market have
risen and
are having
an impact
on lending.
Since the
end of
2021,
credit growth has exceeded
deposit growth by a
factor of four, and refinancing costs
on the Swiss capital
market have
also risen
fourfold. This
structural increase
in costs
is already being
passed on
to Swiss
clients.
The SNB also mentions
that the
costs on the Swiss financing
market may reflect an
adjustment by UBS in
its risk assessment
of loans to
former Credit Suisse
clients. This is
confirmed by UBS
analyses in mid-2024,
which showed that
over a 12-month period,
there was a 6x higher
credit loss expense per
billion in credit
volume
on
a
portfolio
of
former
CS
loans
to
Swiss
clients.
In
addition,
the
SNB
points
out
that
more
stringent
regulation
is
already
leading
to
higher
liquidity
holdings,
which
is
contributing
to
higher
refinancing costs in the domestic market. Global
banks with access to international
capital markets, such
as UBS, can use their more diversified refinancing sources in
such a market environment to help prevent
a credit crunch in the Swiss market, even in a difficult
economic environment.
28
Bank funding costs
Consultation on amendments to the
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Ordinance
Page 25 of 33
29
30
Even following the acquisition of
Credit Suisse by
UBS, the Competition Commission (WEKO)
continues
to
see
effective
competition
.
This
is
also
reflected
in
the
low
net
interest
margins
of
Swiss
banks
compared with
their European
counterparts. In
addition to
the existing
credit supply
shortage and
the
implementation of the final Basel 3 standards for lending, a
further tightening of capital requirements is
therefore
likely
to make
loans even
more
expensive and
further restrict
supply.
Against this
backdrop,
measures
such
as
the
additional
capital
costs
proposed
by
the
Federal
Council
must
be
analyzed
comprehensively in terms
of their cost implications
for all clients in
order to avoid unnecessary
damage to
the efficient Swiss financial center.
Furthermore,
the
business
community
has
repeatedly
and
clearly
stated
its
position
on
the
negative
economic consequences
for the
Swiss economy
and for
SMEs
in
particular.
In
its
statement on
the
Capital Adequacy Ordinance
of September 29, 2025,
Economiesuisse stated:
"Regulation must therefore
not be assessed in isolation in the
financial sector,
but must always take into account the impact
on the
economy
as
a
whole:
restricted
credit
supply,
higher
financing
costs,
and
a
weakening
of
investment
activity directly affect the real economy – especially SMEs and industrial
investment projects."
5.2.
Impact on the Swiss financial center and
the economy
The
financial
sector
is
a
cornerstone of
Switzerland's
economy
and
its
position
as
a
center
of
manufacturing
.
The
report
"Bedeutungsstudie
2025"
(Significance
Study
2025)
published
in
December 2025
by
BAK Economics
on
behalf of
the Swiss
Bankers Association
(SBA) underscores
the
importance of the financial sector.
For example, 5.5% of all employees (approx.
250,000 jobs) generate
8.8%
of
Switzerland's
gross
value
added
and
9.2%
of
tax
revenue
(CHF
9.9
billion).
The
study
also
explains the importance of
the financial sector
as a driver
for other industries and
states that the
sector
indirectly
employs
approximately
280,000
people.
In
addition,
the
financial
sector makes
a
significant
contribution to Swiss exports and generates
a net service surplus of CHF 18.7 billion.
With more than 30,000 employees in
Switzerland, UBS is a
pillar of the financial sector
. Over the past
ten years,
UBS, Credit
Suisse, and
their employees
in Switzerland
have paid
around CHF
25 billion
in taxes.
In addition, UBS purchases services and goods
worth approximately CHF 4 billion annually in
Switzerland
and pays hundreds of millions of Swiss francs each year to sponsor important projects and institutions in
the fields
of education,
culture, society, and sports.
The latest
edition of
the "UBS
Worry Barometer" from
December 2025
also shows
that the
biggest concerns
for Swiss
people are
the ongoing
rise in
health
insurance premiums
(45%),
environmental protection
(31%) and
retirement
provision
(30%);
financial
stability is cited as a concern by
only 4% of respondents.
The Swiss economy benefits from
reliable domestic banking service providers.
Foreign competitors,
on the
other hand, often
focus selectively on
specific business areas
and do
not demonstrate the
same
reliability as domestic providers. Experience
during the global financial
crisis and the COVID-19
pandemic
has shown that foreign
banks reduce their lending abroad
in times of crisis or
even cease their activities
altogether. Excessive dependence on foreign players could therefore exacerbate a credit crunch precisely
when
the
economy
needs
support.
The
Federal
Council
has
also
highlighted
the
advantage
of
internationally
active
Swiss
banks
for
secure
access
to
essential
financial
services.
In
the
current
environment
of
a
significantly
more
uncertain
world,
in
which
many
countries
are
seeking
greater
autonomy and independence, due consideration
should therefore be given to the possibility of increased
dependence on foreign providers for domestic lending and access
to international financial markets.
29
Significance Study 2025
30
Federal Council Report on Banking Stability (2024, p. 18): "Large, globally oriented
banks [...] also strengthen the
supply
of
financial
resources
to
the
real
economy.
They
offer
access
to
global
payment
transactions,
currency
hedging,
capital
market
services,
export
financing,
and
support
for
start-ups,
IPOs,
and
mergers.
Large
internationally active banks also provide essential services
for other banks in Switzerland, such
as securities custody
and
international currency
settlement.
Internationally active
Swiss banks
that offer
these
services
make
the real
economy less
dependent on decisions
made in other
jurisdictions, thereby
protecting companies'
access to these
services."
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 26 of 33
With regard
to the
competitive environment in
Switzerland,
EU banks
in particular
can offer
favorable
loans
through
their branches
in Switzerland
, e.g.,
in the
form of
guarantees for
traditional export
financing.
Since the demise of
Credit Suisse, branches of
foreign banks have
been increasingly entering
the Swiss banking market,
focusing on the most attractive market segments (e.g., large SMEs and larger
transactions in
trade and
export financing). They
enjoy significantly easier
market access
in Switzerland
than Swiss banks are granted
in the EU, for example.
Due to their size
and lower attractiveness,
SMEs are
generally unable to benefit from
the growing range of
services offered by
foreign banks. An increase
in
the costs of international banking transactions would
particularly affect the broad mass of SMEs, as they
structurally lack direct access to
foreign banks. Against this
background, the existing, obvious
distortion
of competition,
particularly in favor
of EU banks,
would be significantly
increased by the
Federal Council's
proposal. Nor would the economy as a whole benefit
from the proposal.
The report
commissioned by
the Federal
Council and
prepared
by Alvarez
& Marsal
also concludes
that
increased
capital
requirements
could
have
negative
effects
in
Switzerland,
such
as
a
reduction
in
the
supply of credit,
lower deposit interest
rates, and job
cuts, and that
these could have
an impact on
the
Swiss economy as a whole.
In particular, however,
there are fears of harmful
effects on economic activity
and consumer sentiment in
Zurich, Geneva, and
Basel, where most
of the bank's
employees are based.
UBS
also
represents
the
interests
of
around
30,000
employees
in
Switzerland
and
their
families.
The
substantial
contributions
made
by
the
entire
UBS
Group
to
the
Swiss
economy
and
tax
revenues,
as
mentioned at the outset,
are not sufficiently
taken into account in
the assessment of the
consequences
of tighter
regulation. In
the context
of the
Swiss financial
center, it is
also important
to consider
that
value
created abroad
flows back into Switzerland in the form of dividends and other benefits.
This materially
benefits the economy as a whole. Finally,
UBS contributes significantly to the appeal of the international
financial center, which benefits other
banks and Swiss
companies in general,
and thus the
entire country.
The listed
effects on
Swiss clients,
the financial
center, and the
economy illustrate
how important
balanced
and internationally aligned banking regulation is. The Federal
Council should
take
the
concerns of the
economy
seriously
and
ensure
the
basis
for
a
long-term
successful
and
competitive
Swiss
business
location with a balanced package of measures.
5.3.
Impact on UBS shareholders
Since
the
publication
of
the
Federal
Council
report
in
April
2024,
uncertainty
surrounding
potentially
excessive capital
requirements has
caused UBS's
market valuation
to underperform
banks in
Europe and
the US by 27%
(approx. CHF 30 billion) through
the end of December 2025. For
UBS shareholders, this
represents a
significant destruction
of value
in addition
to the
costs of
integrating Credit
Suisse. The
partial
recovery in the share price due
to speculation about a possible compromise in December 2025 confirms
the relevance
of regulation
to valuation.
Market participants
are
concerned that,
although UBS
would
report very
high capital
under the
proposed regulation,
it would
not be
able to
use it
productively and
would therefore lose a great deal of competitiveness.
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 27 of 33
Figure
11:
Development
of
the
UBS
share
price
compared
with
Dow
Jones
Banks
Titans,
April 2024 - December 2025 (indexed)
31
70
80
90
100
110
120
130
140
150
160
170
1
-
Apr
-
24
1
-
Jul
-
24
1
-
Oct
-
24
1
-
Jan
-
25
1
-
Apr
-
25
1
-
Jul
-
25
1
-
Oct
-
25
1
-
Jan
-
26
UBS (SIX/CHF)+33%
Dow Jones
Banks Titans+60%
+27%
+40%
Source: Factset Research Systems
5.4.
Impact on the stability and strategic future of UBS
The expert report by
Alvarez & Marsal
commissioned by the Federal Council in June 2025 points
out
that "The significant delta of capital requirements for UBS might drive
an unlevelled playing field relative
to peers, potentially necessitating change in its strategy to safeguard the viability of its business model."
(page 49).
With
the
measures
proposed
by
the
Federal
Council,
every
franc
of
income
for
UBS
will
become
significantly more expensive
compared to its
competitors. This
will have a
negative impact
on profitability.
The disproportionately high capital requirements proposed by
the Federal Council are already leading to
a
loss of confidence among investors.
As shown above, despite very good business performance and
rapid progress
in the
integration of
Credit Suisse,
UBS's share
price has
performed significantly
worse than
its
European
and
US
competitors.
A
prolonged
period
of
uncertainty
regarding
potentially
extreme
regulatory changes is testing investors' patience,
weakening the reputation of the
financial center, and is
not in the interests of financial stability. Lower profitability and less diversification also weaken the
ability
to raise capital in a crisis and thus the
resilience of the bank
.
31
Alvarez & Marsal expert report
Consultation on amendments to the
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Ordinance
Page 28 of 33
32
33
34
35
36
37
38
39
Appendices
Appendix 1: Capital adequacy regulations in
peer jurisdictions
In an
international comparison, the
explanatory report concludes
that there
is no
‘Swiss finish’
within
the meaning
of Article
4 of the
Corporate Relief
Act of
September 29,
2023 (UEG).
The following
explains
why we believe this conclusion falls short.
The
report
evaluates
the
Basel
minimum
standards
and
the
supervisory
standards
of
the
Financial
Stability Board (FSB). Although none
of the regulations formally
take into account
the capital coverage of
subsidiaries,
according
to
the
report,
a
capital
deduction
from
subsidiaries
can
be
derived.
The
Basel
minimum standards allow
equity securities (CET1,
AT1, or bail-in capital) made
available to subsidiaries
to
be deducted
from the
corresponding capital
component of
the parent
company.
Equity investments
in
subsidiaries in the EU and UK are risk-weighted at 250% up to a threshold of 10% of the parent bank's
Common Equity
Tier 1
capital (CET1).
The
FSB standards
aim
to avoid
double counting
of capital
and
therefore require the deduction of internal TLAC (
) instruments.
The report points
out that
there are no
legal entity
structures comparable
to those
of
the
large
US banks
.
This does not correspond with
our analysis:
JPMorgan Chase Bank, N.A.
has a similar role to UBS
AG and
holds subsidiaries in significant
subsidiaries in the UK
(J.P.
Morgan Securities plc) and
the EU (J.P. Morgan
SE).
The
total
capital
of
these
two
subsidiaries alone
amounts
to
around
one
third
of
the
capital
of
JPMorgan Chase Bank, N.A.
The report also
fails to mention that
capital requirements in
the US do
not
apply on a standalone parent bank basis.
For the
EU
, the
explanatory report contains
assumptions about the
exercise of supervisory
discretion to
require the deduction of intra-group subsidiaries
for the purpose of structural
separation (Art. 49(2)
CRR)
by the EU authorities. It states that there is no evidence
which is incorrect:
●
The
ECB's
regulatory
disclosures
show
that
in
2024,
19
out
of
109
banks
will
benefit
from
exemptions for
parent
companies under
Article 7(3)
of the
CRR, including
Deutsche Bank
and
Crédit Agricole
. Banks with exemptions for parent banks do
not have capital requirements on
a standalone basis, so a deduction is irrelevant.
●
The ECB's
supervisory policy
refers to
the deduction
being necessary
in "certain
cases"
. The
ECB
does
not
require
such
a
deduction
in
the
most
obvious
cases,
i.e.
for
global
banks
that
conduct
extensive
business
outside
the
EU
as
part
of
so-called
multiple-point-of-
entry/decentralized settlement strategies (BBVA
and Banco Santander
).
For the
UK
, the
explanatory report states
that there
are no
legal structures
comparable to those
of the
major British banks. Barclays
Bank plc holds the most
important foreign subsidiaries
and is an active bank
in
the
UK.
We
do
not
see
any
significant
difference
to
the
role
of
UBS
AG
within
the
UBS
Group.
Furthermore, the report indicates that
there is no evidence that
the authorities have granted
any waivers.
However, all waivers granted by the PRA are publicly available in the Financial Service Register.
32
Total
Loss-Absorbing Capacity
33
JPMorganChase, Resolute Annual Report 2024, page 107
34
European Central Bank Banking Supervision, Data on credit risk (year
2024)
35
according to their reports on Pillar 3
36
European Central Bank Banking Supervision, ECB Guide on options and discretions
available in Union law
37
BBVA Banco Bilbao Vizcaya Argentaria, S.A. 2024, Financial Statement,
Management Report and Audit Report,
page 120
38
A significant reduction in holdings in group companies would be inconceivable
given the relative size of these
subsidiaries (97.7 billion) compared to the parent bank's equity (79.9 billion)
.
Source:
Banco Santander,
S.A.,
Auditor's report, Annual accounts and director's report for
the year ended December 31, 2024
39
The Financial Services Register
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 29 of 33
40
41
42
For Barclays Bank plc, the parent bank, the following waivers
can be accessed, for example
:
●
Waiver
of the
leverage ratio
for the
individual situation
of Barclays
Bank plc.
Any deduction
of
shares in subsidiaries is therefore irrelevant for the leverage ratio.
●
Waiver of
individual consolidation for
large Barclays
special purpose entities
in order
to avoid
a
potential deduction of shares in subsidiaries.
●
Core UK Group Waiver,
whereby companies within the Core UK are assigned
a risk weighting of
0% (excluding capital instruments) and risk positions
are excluded from the leverage ratio
The Federal Council's explanatory report does not mention that in the
EU and UK
,
CET1 investments in
subsidiaries
up to 10%
of the parent
company's CET1 are
not deducted
but must be underpinned
with a risk weighting of 250%
. This exemption also applies to
capital investments that are deductible
on the basis of supervisory discretion in accordance with
Art. 49 para. 2 of the UK CRR.
Finally,
it is important
to note that
Switzerland would be acting
unilaterally on a global
scale with a
full
deduction from Common Equity Tier 1 (CET1) capital. There are no
global standards
or major financial
centers that require AT1 investments in subsidiaries to be deducted from the parent bank's CET1
capital.
If a deduction is required, it
follows a corresponding deduction approach, whereby AT1
investments are
deducted from the parent bank's AT1 capital.
In the EU, AT1 investments are risk-weighted unless they
have to be deducted from AT1 capital due to a specific supervisory decision.
40
The Financial Services Register,
Barclays Bank UK PLC
41
BSBS: CAP 30.32; UK: Art. 48(1)(b) of the UK CRR; EU: Art. 48(1)(b) of the CRR
42
BCBS: CAP 30.30; UK: Article 56(d) of the UK
CRR
; EU: Art. 56(d) CRR
Consultation on amendments to the
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Ordinance
Page 30 of 33
43
Appendix 2: Consultation responses
and WAK-S/N statement
All business associations,
the financial sector, the cantons with
strong financial centers, and
the business-
orientated
parties
reject
the
Federal
Council's
proposals
for
the
full
deduction
of
software
and
deferred tax
assets
,
either in
full or
at
least by
the majority
. This
is in
line with
the view
of the
Economic Affairs
and Taxation
Committee of
the National
Council (WAK
-N) and
the Council
of States
(WAK-S),
which
criticize
above
all
the
lack
of
international
coordination
and
the
resulting
negative
consequences for competition.
The evaluation below refers
to 68 of
the 73 consultation
responses that
we included in the analysis.
●
Rejection of the deduction of software
from Common Equity Tier 1 (CET1)
capital
by
75%
or
24 of the 32 responses that commented on
the issue. A significant proportion of respondents reject
the full deduction
of software from
CET
1 capital, as
this is considered
to be hostile
to innovation,
not
internationally aligned,
and
detrimental
to
competitiveness.
The
WAK-N/ -S
also
calls
for
the
valuation of capitalized IT investments to be based
on international standards and cites the example
of the EU, which prescribes depreciation over three years. A full deduction would significantly
impair
competitiveness.
●
Rejection of the deduction of deferred tax assets from Common Equity
Tier 1 (CET1) capital
by
76%
or 22 of 29 of the 32
comments that addressed this issue.
Many comments oppose the full
deduction of
deferred
tax assets,
as
this
exceeds international
standards and
does
not
adequately
reflect the economic value of these items.
The WAK-N/-S
also conclude that the planned regulation
clearly exceeds
Basel III
standards and
the practice
of competing
financial centers,
and warn
that a
lack
of
differentiation
not
only
weakens
the
stability
of
supervised
institutions,
but
also
their
competitiveness.
In addition, a
large number of
comments express
concern about the
negative impact on
the
economy
and Switzerland
as a
business location
. Furthermore,
many comments
criticize the
lack of
an overall
view and international orientation, as
well as the
shift from the
going concern principle to a
liquidation
perspective.
●
Negative economic effects
are highlighted by
60%
or 41 comments.
The majority of respondents
fear
higher
financing
costs,
restricted
lending,
and
a
weakening
of
competitiveness.
WAK-N
and
WAK-S
demand that
the competitiveness
of Switzerland
as a
financial
and
banking center
not
be
weakened by the measures.
●
A lack
of overall
perspective
is criticized
by
60%
or 41
comments.
The majority
of respondents
criticize the
lack of
a comprehensive
overview of
all planned
regulations and
a well-founded
cost-
benefit
analysis
to
adequately
assess
the
impact
on
the
financial
center
and
the
economy.
WAK-N/-S
warn
that
tightening
should
not
go
beyond
the
regulation
of
international
financial
centers
in
order
to
ensure
a
relationship
between
the
costs
and
benefits
which
preserves
competitiveness
●
The lack
of international
alignment
is criticized
by
60%
or 41
comments.
Many comments
criticize
the fact
that the
proposed amendments
are not
sufficiently aligned
internationally and represent
a
‘Swiss finish’
. This would lead
to competitive disadvantages
for Swiss banks.
WAK-N agrees with
this demand
and calls
for measures
not to
exceed international standards
and common
practice in
competing financial centers,
both individually and as
a whole.
WAK-S
calls for "maximum use
of the
national
leeway
offered
by
Basel
III,
in
line
with
the
EU
and
the
UK,
in
order
to
maintain
the
competitiveness of Switzerland as a financial
and banking center."
43
Consultation responses
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 31 of 33
●
Negative effects on the attractiveness
of Switzerland
as a business location
are highlighted by
66%
of respondents, or
45 comments.
A majority of
respondents fear that
the measures
proposed
will
weaken
the
attractiveness
of
Switzerland
as
a
financial
center
and
economic
hub,
as
well
as
Switzerland as a business location
overall. In particular, they point to the risk of job
losses, migration,
and a
deterioration in the
overall business
environment.
The WAK-N/-S
specifically recommend
to
the Federal Council that the planned
tightening of regulations should not go
beyond the regulation
of international
financial centers
in order
to ensure
the attractiveness
of Switzerland
as a
business
location.
●
Criticism
of
the
shift
to
a
liquidation
perspective
is
expressed
in
22%
and
15
responses,
respectively.
Some
responses
criticize
the
creeping
shift
from
the
going
concern
principle
to
a
liquidation perspective
triggered by
the new
deductions. They
see this
as a
departure from
proven
international valuation principles.
Consultation on amendments to the
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Ordinance
Page 32 of 33
44
45
46
Appendix 3: Total cost of capital
The TBTF proposals
mean that UBS
must hold more
CET1 for its
existing business. This
additional CET1
would replace a certain amount of debt financing,
i.e., the volume of debt held by UBS would decrease.
Based on
practical experience, UBS
assumes that higher
capital will
lead to
an
increase in the
cost of
total capital
. Despite
a doubling
of the
unweighted leverage
ratio over
the last
15 years,
the cost
of
capital has remained constant at around 10%. In terms of debt costs, UBS is already at the lower end of
credit
risk
premiums,
leaving
little
room
for
material
improvement.
UBS
therefore
estimates
that
an
increase in capital requirements of USD 10 billion will
increase the net cost of capital (CoC) by up
to USD
800 million.
There are various
theories/calculations regarding the resulting total
cost of capital (CoC), which
is made
up
of
the
cost
of
equity
(CoE)
and
the
cost
of
debt
(CoD).
In
theory,
higher
equity
reduces
both
components of
the total
cost of
capital (the
so-called Modigliani-Miller
effect). The
calculations of
this
effect are based on a
number of assumptions
that do not
prevail in market reality
(e.g., tax effect, perfect
market efficiency, and simplifications of the capital structure).
The
differing
estimates
of
the
total
cost
of
capital
are
due
to
the
different
assumptions
and
methodologies used in the
underlying studies. The assumptions
regarding the cost of equity are
relatively
similar in
all studies
(i.e., Böni
& Zimmermann
, Alvarez
& Marsal
) and
are in
line with
the UBS
consensus
estimates made by independent
analysts of around 10%. However, there are methodological differences
in the determination of debt financing costs, such as the double counting
of AT1 costs in the calculation
of the bank's
average financing
costs. However, the main difference
in capital cost
estimates is due
to the
net effect
assumptions of
Modigliani-Miller
(MM). Böni
and Zimmermann
assume a
large influence
(almost
complete MM offset, 96%), while UBS, Alvarez & Marsal, and the market do not consider the net effect
to be relevant.
Professor Zimmermann
, the
expert commissioned by
the Federal
Council, presented
two studies
in a
short period whose estimated
capital costs as a result
of an increase in equity capital
differ tenfold. In the
first study from April
2025
, published together
with the Federal
Council's proposals on
banking stability
in June 2025,
an additional CHF
10 billion in
equity capital leads
to estimated additional
costs of CHF
320
million.
In
the
second
study
from
August,
the
figure
is
only
CHF
32
million.
UBS
considers
it
highly
problematic
that
such
studies
are
used
by
the
authorities
as
a
decisive
basis
for
estimating
the
cost
implications without
pointing out
the
high degree
of
dependence on
assumptions and
the associated
significant distortions.
Instead,
costs
should
be
assessed
on
the
basis
of
transparent,
market-observable,
and
verifiable
indicators
(e.g., analysts' estimates
of expected equity
costs, credit default swap spreads,
ratings agency
assessments, and empirical correlations between equity
and equity costs).
44
Böni & Zimmermann (2025): The effective cost of capital buffers for UBS: A Reappraisal
based on empirical
research.
45
Alvarez & Marsal (2025): Analysis of the costs and benefits from proposed changes
to the regulatory capital
treatment of participations in foreign subsidiaries of Swiss-based SIBs.
46
Zimmermann (2025): Brief report on the capital cost effects of higher capital adequacy
requirements for a
systemically important bank (UBS).
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 33 of 33
List of figures and tables
Figures
Figure 1: Proposed TBTF regime exceeds the strictest
international regulations
.......................................
8
Figure 2: Comparison of capital requirements for
G-SIBs ........................................................................
9
Figure 3: USD 39 billion additional capital requirement
due to Credit Suisse acquisition and tighter
regulations
............................................................................................................................................
10
Figure 4: Expected impact of adjustments to
capital requirements in peer jurisdictions
.........................
11
Figure 5: Effect of aggressive valuation and regulatory
concessions
......................................................
14
Figure 6: Credit Suisse AG's foreign subsidiaries
(CHF billion)
................................................................
14
Figure 7: Capital underpinning of foreign subsidiaries
– cost/ benefit perspective
.................................
16
Figure 8: Model for recovery and
resolution
..........................................................................................
20
Figure 9: Restructuring is central to resolution
......................................................................................
21
Figure 10: Development of credit volume and
increasing funding in the capital market
........................
24
Figure 11: Development of the UBS share
price compared with Dow Jones Banks Titans,
April 2024 -
December 2025 (indexed)
.....................................................................................................................
27
Tables
Table 1: Effectiveness of alternatives (1Q25 )
........................................................................................
18
SIGNATURES
Pursuant to the requirements of
the Securities Exchange Act of 1934, the registrants
have duly caused this
report to be signed on their behalf by the undersigned, thereunto duly authorized.
UBS Group AG
By: _/s/ David Kelly______________
Name:
David Kelly
Title:
Managing Director
By: _/s/ Ella Copetti-Campi_________
Name:
Ella Copetti-Campi
Title:
Executive Director
Date: January 12, 2026