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UBS on Tuesday criticized the Swiss government’s proposals requiring the country’s largest bank to hold significantly more capital, warning that the measures could undermine the bank, the wider financial sector, and Switzerland’s economic stability.

UBS responds to government consultation

While supporting the government’s objective of strengthening Switzerland’s financial framework and drawing lessons from the Credit Suisse crisis, UBS argued that the proposed capital requirements fall short of achieving these goals.

According to the bank, the new rules would force it to hold approximately $42 billion in additional capital. UBS said this approach would put it at a disadvantage compared with international peers, strain the Swiss economy, and fail to fully reflect the lessons from Credit Suisse’s collapse.

Capital rules seen as extreme

UBS described the proposed measures as “extreme” and criticized them for lacking proportionality and alignment with international standards. The bank emphasized that the rules would disproportionately impact UBS, potentially weakening Switzerland’s position as a leading global financial hub.

The proposals also include changes to how the bank calculates its core capital. Under a plan announced in June, UBS would no longer be able to include software assets and deferred tax assets in its regulatory capital. The bank argues that such changes could limit its operational flexibility and ability to compete internationally.

Government review process

The Swiss government is currently reviewing feedback from UBS, other industry stakeholders, and political parties before finalizing any changes to the capital framework. Authorities aim to reduce systemic risk in the banking sector while maintaining Switzerland’s competitive position in global finance.

Broader economic implications

Financial analysts suggest that requiring UBS to hold an additional $42 billion could have ripple effects beyond the bank itself. Higher capital requirements could reduce lending capacity, slow investment, and increase costs for Swiss businesses and consumers.

UBS’s warning underscores the delicate balance regulators face: ensuring financial stability while keeping the country’s banking sector competitive on the international stage. With Switzerland’s financial center contributing a significant portion of national GDP, policymakers will need to weigh potential economic impacts carefully.