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Swiss lawmakers propose a 50-50 capital split for UBS foreign units to balance costs and taxpayer protection.

Swiss lawmakers on the upper-house economics committee have proposed a new funding structure for the foreign subsidiaries of UBS. The proposal suggests backing these units with a 50-50 mix of Common Equity Tier 1 (CET1) capital and Additional Tier 1 (AT1) bonds.

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This structure aims to provide a more cost-effective way to fund foreign units compared to using 100% top-tier equity, while still protecting taxpayers following the collapse of Credit Suisse and the 2023 rescue takeover of UBS. The committee passed the plan with a 10-2 vote, including one abstention. Under the new rules, if the bank's CET1 ratio falls to approximately 11%, UBS would be required to pause dividends, share buybacks, and potentially cut bonuses until capital is rebuilt. The Swiss government separately argues that UBS should hold an additional $20 billion in CET1 capital overall. While the plan is still subject to votes in both chambers, a final outcome could take several years to reach.

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