Switzerland advances regulatory reforms following Credit Suisse collapse

Three years after Credit Suisse’s spectacular implosion, Switzerland is finally putting the regulatory concrete around its banking sector. The Swiss Federal Council on April 22 adopted a sweeping revision of the Banking Act and amended its Capital Adequacy Ordinance, targeting the “too big to fail” framework that, as it turned out, was not quite big enough.

The centerpiece of the reform: systemically important Swiss banks must now fully back their foreign subsidiaries with Common Equity Tier 1 capital at the parent level. For UBS, the only bank that really matters in this conversation after absorbing Credit Suisse, that translates to an estimated $20B in additional capital requirements.

The CET1 hammer

CET1 capital is the highest-quality form of bank capital, essentially equity and retained earnings that can absorb losses without the bank needing to shut its doors. The new mandate specifically addresses a vulnerability exposed during the Credit Suisse crisis: parent banks operating sprawling international networks without sufficient capital ringfenced at home to cover potential losses abroad.

UBS has pushed back, raising concerns about competitiveness. The Swiss National Bank, however, has signaled that UBS remains well-capitalized and can absorb the new requirements without operational disruptions.

How we got here

Credit Suisse’s collapse in March 2023 remains one of the most dramatic bank failures in modern European history. The Swiss government brokered a shotgun marriage with UBS, valued at $3.25B. For context, Credit Suisse’s market capitalization had been north of $30B just a few years earlier.

FINMA, Switzerland’s financial market supervisory authority, published its findings in December 2023, calling for stronger legal tools. Among its recommendations: a Senior Managers Regime that would hold individual executives accountable, enhanced fining powers for the regulator, and tighter oversight mechanisms across the board.

The April 2026 legislative package represents the first concrete result of that multi-year review process. Parliamentary debate on the Banking Act revisions is expected to begin in summer 2026, with additional reforms covering resolution planning, governance standards, and executive remuneration slated for subsequent legislative stages.

What this means for UBS and beyond

For UBS, the math is straightforward but the strategy is complex. An additional $20B in CET1 capital needs to come from somewhere. The bank can retain more earnings, which means potentially smaller dividends. It can raise equity, which dilutes existing shareholders. Or it can shrink its balance sheet, which constrains growth.

The country’s entire GDP is roughly five times UBS’s balance sheet, a ratio that makes any systemic failure an existential threat to the national economy.

The summer 2026 parliamentary debate will determine how closely the final legislation tracks the Federal Council’s proposal. Given the political consensus around preventing another Credit Suisse scenario, significant dilution of the package seems unlikely. The question is whether lawmakers push for even tougher measures, particularly around executive accountability and FINMA’s enforcement toolkit.

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