UBS Capital Rules: Why the 90% vs 100% Vote Matters
Switzerland's upper house voted on September 23, 2026 to require UBS to back its foreign units with 90% Common Equity Tier 1 capital. Reuters That decision sits 10 percentage points below what the federal government demanded.
Common Equity Tier 1, or CET1, is a bank's core safety capital. It is mostly common shares and retained profits, the money that absorbs losses first and protects depositors.
The government had demanded that UBS back its foreign units with 100% CET1 capital. Reuters The 90% level had circulated ahead of the vote as a compromise formulation. UBS Chief Executive Sergio Ermotti rejected that description, saying the 90% proposal is "no real compromise."
That 10-point gap carries a price tag. UBS has stated that full deduction of investments in foreign subsidiaries would require UBS AG to hold around USD 20 billion in additional CET1 capital. UBS That estimate was published on April 22 and refers to a 100% deduction requirement at the parent bank level.
The route to the September 23 vote ran through several procedural steps. On August 31, lawmakers were expected to send a watered-down draft banking bill on UBS capital rules to the upper house. By September 16, a group of lawmakers supported a motion to defer major new banking rules for UBS to the government ahead of an upper-house vote on a compromise. The upper house then postponed its vote after lawmakers ran out of time and rescheduled it for Sept. 23. Swissinfo
Swiss business groups wrote to lawmakers ahead of the September vote to lobby against UBS capital rules they described as risking "excessive" regulation. The UBS Chairman said the bank would need to "consider its future in Switzerland carefully" if new banking rules were so strict that it cannot compete.
The vote took place in a chamber built for cantonal parity rather than population proportionality. The Council of States has 46 members who represent the cantons. Each canton sends two representatives, except Obwalden, Nidwalden, Basel-Stadt, Basel-Landschaft, Appenzell Ausserrhoden and Appenzell Innerrhoden, which each send one. Zurich, with a population of over 1 million, and Uri, with a population of around 35,000, each elect two representatives. Parliament
The broader context here is how a deduction-based requirement feeds into capital planning for the whole group. A participation deduction removes the book value of the foreign subsidiary investment from parent CET1, rather than risk-weighting it. Like cash locked in an overseas till, it cannot be counted twice at home. For practitioners, the question is not only the headline 90% versus 100% calibration. It is where the deduction is applied, over what timetable, and with what transitional treatment for existing participations and retained earnings upstreaming.
Looking at what this means for calibration, the April USD 20 billion figure provides the anchor for sizing the 100% case at UBS AG level. A 90% backing requirement implies a lower incremental CET1 need than full deduction, but not a proportional reduction in complexity. Treasury and capital management still face trapped capital, distribution constraints between parent and subsidiaries, and tighter headroom for buybacks and balance-sheet growth under stress.
In my view, the political signal is as relevant as the arithmetic. The government's 100% ask, the August watered-down draft, the deferral motion, the postponement, and the final 90% upper-house vote trace a negotiation over competitiveness versus loss-absorption at the parent. Business-group lobbying and Ermotti's dismissal of 90% as compromise underline how narrow the perceived relief is from the bank's side. For analysts, the next variables to watch are final legislative text, phase-in, and whether the deduction interacts with leverage, large-exposure and resolution requirements in ways that alter the effective binding constraint.
