Switzerland's financial market supervisor FINMA has welcomed new regulatory proposals that would grant it significantly stronger powers to oversee the banking sector, whilst UBS has strongly objected to extreme capital requirement increases that could force it to hold an additional 24 billion US dollars in capital.

The Swiss Federal Council published parameters on Friday for amendments to the Banking Act following the emergency takeover of Credit Suisse in March 2023. The measures include introducing an accountability regime, expanding FINMA's early intervention powers, and imposing higher capital requirements for systemically important banks with foreign subsidiaries.

FINMA expressed strong support for the proposals, stating they would "make a decisive contribution to reducing the likelihood of crises and resolution occurring in the Swiss banking centre." The regulator particularly welcomed the planned accountability regime, which would require banks to define in legally binding terms who is responsible for specific decisions, enabling targeted sanctions such as clawbacks of variable remuneration already paid out or bonus cuts.

The proposals would also grant FINMA statutory powers to order supervisory measures earlier and more effectively, remove the suspensive effect of appeals, and crucially, provide the authority to impose fines on offending institutions for the first time.

However, UBS has mounted fierce opposition to the capital requirement changes. The bank said the proposals would require it to fully deduct investments in foreign subsidiaries from its Common Equity Tier 1 capital, along with deferred tax assets and capitalised software.

"UBS strongly disagrees with the extreme increase in capital requirements that has been proposed," the bank stated. "These changes would result in capital requirements that are neither proportionate nor internationally aligned."

Based on first quarter 2025 financial information, UBS AG would need to hold approximately 24 billion US dollars in additional estimated capital under the proposals. This includes around 23 billion US dollars related to the full deduction of UBS AG's investments in foreign subsidiaries.

The additional capital would be on top of the previously communicated incremental capital of around 18 billion US dollars UBS will already hold following its acquisition of Credit Suisse to meet existing regulations.

UBS said it would "actively engage in the consultation process with all relevant stakeholders and contribute to evaluating alternatives and effective solutions that lead to regulatory change proposals with a reasonable cost/benefit outcome."

The regulatory changes are not expected to become effective before 2027, and UBS maintains its target of achieving an underlying return on capital of around 15 per cent by the end of 2026.

FINMA stated it was "convinced that they will significantly strengthen the resilience of the Swiss financial centre" and would implement the regime "pragmatically and proportionately."

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