Switzerland Cracks Down on 'Too Big to Fail' Banks

Switzerland is advancing regulatory reforms in its banking sector after the collapse of Credit Suisse in March 2023. The Swiss Federal Council adopted a sweeping revision of the Banking Act and amended the Capital Adequacy Ordinance on April 22, targeting the 'too big to fail' framework that failed to prevent the bank's downfall.

The centerpiece of the reform is a new requirement for systemically important Swiss banks to fully back their foreign subsidiaries with Common Equity Tier 1 capital at the parent level. For UBS, this translates to an estimated $20B in additional capital requirements.

UBS has pushed back against the new mandate, citing concerns about competitiveness. However, the Swiss National Bank has signaled that UBS remains well-capitalized and can absorb the new requirements without operational disruptions.