Summary

The Economic Commission of the Council of States has postponed deliberations on UBS's equity capital endowment and intends to examine "variants and alternatives" to the Federal Council proposal by mid-August. The initiative, which would require the major bank to back its foreign subsidiaries 100% with hard core equity capital (CET1), will therefore not be debated before the autumn session at the earliest. In parallel, the Commission is planning to resume work on the Public Liquidity Backstop (PLB) – a state emergency aid facility for banks.

People

Topics

  • Banking regulation
  • UBS equity capital
  • Financial stability
  • Lobbying influence

Clarus Lead

The delay gives the banking lobby the entire summer to push through compromise variants such as partial backing with AT1 bonds – while the Council of States simultaneously wants to anchor state emergency liquidity (PLB). This leads to an ordoliberal inconsistency: the taxpayer should cover risks whose mitigation through UBS's own capital the bank rejects. This becomes particularly problematic against the backdrop of the bank's planned US expansion from 2027 onwards, which will significantly expand its balance sheet.

Detailed Summary

The Council of States Commission's delaying tactic opens the door to dilution tendencies. The Federal Council had already proposed a moderate compromise – full backing of foreign subsidiaries with hard core equity capital (CET1). The banking lobby will now argue that UBS could partially raise additional capital through controversial AT1 bonds (Contingent Convertible Bonds), which can lose value in a crisis.

An empirical analysis of bank data from 1987 to 2024 by Basel economics professor Peter Kugler shows a surprising result: for Swiss major banks, statistically significantly larger balance sheets are associated with lower profits. Kugler concludes that UBS's profits do not follow a long-term growth path and states: "For major banks, an aggressive growth strategy therefore appears unconvincing." The expansion into the US starting in late 2027 – offering private and savings accounts as well as lending to wealthy Americans – will significantly expand the bank's US balance sheet and increase its risk profile.

The planned Public Liquidity Backstop is state billion-franc emergency aid – similar to the intervention in Credit Suisse. The Commission wants to anchor this safety net in law and have UBS "compensate" for it. The irony lies in the fact that the taxpayer effectively covers an expansion that results from the bank's insufficient equity capital. Equity capital functions as a price tag: it forces companies to self-finance their expansions and bear the consequences – not the state.

Key Statements

  • The Council of States Commission postpones UBS equity capital rules until mid-August, giving the banking lobby an entire summer to exert influence.
  • A new study shows that larger balance sheets at Swiss major banks are statistically correlated with lower profits – aggressive growth strategies are therefore questionable.
  • UBS's planned US expansion significantly increases risk; without 100% capital backing, the Swiss taxpayer effectively secures this foreign expansion.
  • The parallel anchoring of the Public Liquidity Backstop creates a contradiction: the state is expanding safety nets while not demanding hard equity capital from banks.

Critical Questions

  1. Data Quality: How representative is Kugler's sample (1987–2024) for the current market situation of UBS? Are structural changes in the banking sector (digitalization, post-2008 regulation) taken into account in the analysis?

  2. Conflict of Interest: What funding sources does the banking lobby have planned for its "alternatives" papers over the summer? Are parliamentarians financially connected to banks or major corporations?

  3. Causality: Does Kugler's study show that growth reduces profitability, or that unprofitable banks grow to stabilize their margins? What control variables were used?

  4. Feasibility of AT1 Variant: How much AT1 capital could UBS place on the market without its refinancing costs rising significantly? Which rating agencies classify AT1 solutions as equivalent to CET1?

  5. Moral Hazard: How would anchoring the PLB change UBS's risk behavior if equity capital ratios are not increased?

  6. US Regulation: What capital requirements does the Fed impose on the UBS subsidiary, and are these higher or lower than the Federal Council proposal?

  7. Timeframe: Why does the Commission not convene again until mid-August – is this standard parliamentary rhythm or tactical delay?

  8. Taxpayer Costs: To what amount could state emergency liquidity for UBS amount if the bank finances its US expansion with insufficient equity capital?

Sources

Primary Source: Ade, Valentin: "Equity Capital Debate – Council of States Gives UBS the Entire Summer to Dilute" – Finance and Economics, 05.05.2026 https://www.fuw.ch/ubs-eigenkapitalvorlage-staenderats-kommission-will-alternativen-pruefen-336341629143

Supplementary Sources (mentioned):

  1. NZZ am Sonntag: Report on UBS expansion in the USA (end of 2027)
  2. Kugler, Peter: Empirical Analysis of Swiss Major Banks' Balance Sheets 1987–2024

Verification Status: ✓ 05.05.2026

This text was created with the assistance of an AI model. Editorial Responsibility: clarus.news | Fact-Check: 05.05.2026