Switzerland's Federal Council has adopted a legislative proposal to revise the Banking Act that would require systemically important banks to fully back the carrying value of participations in foreign subsidiaries with the Swiss parent bank's Common Equity Tier 1 (CET1) capital. At the same time, it amended the Capital Adequacy Ordinance and related ordinances, scaling back some earlier capital proposals following consultation feedback. The Banking Act proposal targets a gap identified in the Credit Suisse case, where foreign participations were not adequately backed by CET1 and valuation losses immediately reduced the Swiss parent’s capital ratios. Under the new approach, foreign participations could no longer be partially financed with debt, aiming to allow disposals of foreign subsidiaries during recovery without worsening parent-bank capital ratios and to shift losses to shareholders rather than taxpayers; the Swiss National Bank and the Swiss Financial Market Supervisory Authority support the package. For the ordinances, the Federal Council dropped plans to require full CET1 backing for deferred tax assets and software, opting instead for a maximum three-year amortisation period for software aligned with EU rules and limiting the change to systemically important banks, while deferring deferred tax asset changes and pausing proposed adjustments to Additional Tier 1 instruments pending international developments. Most measures apply only to systemically important banks, with stricter treatment of difficult-to-value balance sheet items extending to a few larger non-systemically important banks; the authorities estimate the package would strengthen UBS’s parent-bank CET1 by around USD 20 billion on the status quo, with a pro forma UBS Group CET1 ratio of 15.5% after implementation. Parliament is expected to debate the Banking Act revision from summer 2026, and the Federal Council intends a seven-year transition period if parliamentary deliberations are not delayed. The ordinance amendments will enter into force on 1 January 2027, with a two-year transition period for the regulatory treatment of software.
Federal Department of Finance (Switzerland) 2026-04-22
Switzerland's Federal Council adopts Banking Act revision proposal requiring full CET1 backing for foreign subsidiaries and amends capital ordinances
The Swiss Federal Council has adopted a legislative proposal to revise the Banking Act requiring systemically important banks to fully back participations in foreign subsidiaries with Common Equity Tier 1 capital, and has amended the Capital Adequacy Ordinance and related ordinances, scaling back some earlier capital proposals. Supported by the Swiss National Bank and FINMA, the package addresses gaps revealed in the Credit Suisse case, tightens the treatment of difficult-to-value assets for large banks, and is estimated to increase UBS’s parent-bank Common Equity Tier 1 capital by around USD 20 billion, implying a pro forma UBS Group CET1 ratio of 15.5%.