Switzerland’s Federal Council has opened a consultation on amendments to the Banking Act and the Capital Adequacy Ordinance that would require systemically important banks to fully capitalise participations in foreign subsidiaries by deducting their carrying value from Common Equity Tier 1 (CET1) capital. The proposal would raise the capital requirement in steps over a seven-year phase-in. The changes aim to prevent valuation losses on foreign subsidiaries from directly reducing the Swiss parent bank’s capital that supports its operating business, strengthening the parent company’s resilience across going concern, recovery and resolution. The measure would apply only to systemically important banks with foreign participations and, on current facts, UBS would be the only bank significantly affected; the Federal Council noted that the cost impact could be shaped by UBS management decisions and that costs should be borne by the foreign business rather than Swiss clients. The Federal Council, the Swiss National Bank (SNB) and the Swiss Financial Market Supervisory Authority (FINMA) consider the measure essential for meeting Switzerland’s too-big-to-fail objectives, and an independent appraisal commissioned by the Federal Department of Finance supports this assessment. The consultation runs until 9 January 2026. The Federal Council intends to implement the phase-in via an ordinance-level transitional provision, with CET1 capital backing set at 65% upon entry into force and increasing by 5 percentage points per year until reaching 100%, with the start of the transition linked to progress in the parliamentary process. Consultation on the remaining legislative measures in the too-big-to-fail package is planned for the first half of 2026.

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