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
☒
☐
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
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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
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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
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
,
,
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, 2024. 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
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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
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
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
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The SNB confirms that
banks' refinancing costs in the financial market
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
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1.
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
the key points can be found in
elements of the package of measures in future consultation procedures.
1
2
Consultation on amendments to the
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Ordinance
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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
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Ordinance
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Figure 1: Proposed TBTF regime exceeds the strictest international regulations
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
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
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Ordinance
Page 9 of 33
Figure 2: Comparison of capital requirements for G-SIBs
~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
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
treatment of participations in foreign subsidiaries of Swiss-based SIBs.
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Ordinance
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Figure 3: USD 39 billion additional capital requirement due to Credit Suisse acquisition and tighter
regulations
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
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
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
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Page 11 of 33
Figure 4: Expected impact of adjustments to capital requirements in peer jurisdictions
(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
administration," October 2025
10
11
Phase, Leaving Most Questions Open For Now," October 2025
Consultation on amendments to the
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Page 12 of 33
On September 26, 2025, the Federal Council published a
study by the consulting firm BSS
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
13
14
Education and Research. Version 2.0. (April 1, 2024).
15
September 11, 2025.
Consultation on amendments to the
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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
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."
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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.
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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.
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Figure 7: Capital underpinning of foreign subsidiaries – cost/ benefit perspective
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
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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
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
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
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
22
instruments, based on an assumption of max. AT1 based on the existing capital adequacy regulations.
23
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%.
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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
,
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
.
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
"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
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.
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Figure 8: Model for recovery and resolution
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.
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
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."
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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
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
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
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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.
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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.
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Figure 10: Development of credit volume and increasing funding in the capital market
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
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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
30
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."
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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
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.
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Figure 11: Development of the UBS share price compared with Dow Jones Banks Titans,
April 2024 - December 2025 (indexed)
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
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.
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
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 28 of 33
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
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
33
34
35
36
37
page 120
38
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
Consultation on amendments to the
Banking Act and the Capital Adequacy
Ordinance
Page 29 of 33
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
41
42
CRR
; EU: Art. 56(d) CRR
Consultation on amendments to the
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Ordinance
Page 30 of 33
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
,
. 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
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
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
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
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
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
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 on amendments to the
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Ordinance
Page 31 of 33
●
Negative effects on the attractiveness
of Switzerland
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
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
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
research.
45
treatment of participations in foreign subsidiaries of Swiss-based SIBs.
46
systemically important bank (UBS).
Consultation on amendments to the
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Ordinance
Page 33 of 33
List of figures and tables
Figures
Figure 3: USD 39 billion additional capital requirement due to Credit Suisse acquisition and tighter
Tables
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