The Swiss government has unveiled a new consultation on amendments to its Banking Act, aiming to significantly strengthen the “too big to fail” regime for systemically important banks.

The move, directly stemming from the lessons learned during the Credit Suisse crisis, seeks to reduce risks for the state, taxpayers, and the wider economy. While the Swiss Financial Market Supervisory Authority (FINMA) has welcomed the proposed measures, major banking giant UBS has quickly condemned them as “extreme” and “neither proportional nor internationally aligned.”

The Federal Council, Switzerland’s executive body, outlined the details of the forthcoming amendments, which will be submitted for consultation in stages starting this autumn. Key proposals include:

• Stricter capital requirements: Systemically important banks with foreign subsidiaries will face higher capital requirements. The government’s goal is to ensure that valuation losses on foreign participations do not erode the parent bank’s capital base in Switzerland.
• Enhanced recovery and resolution powers for FINMA: FINMA will be granted new statutory powers in areas such as corporate governance, early intervention, and resolution. This is intended to enable FINMA to intervene earlier and more effectively in a crisis.
• Accountability regime for senior managers: The proposals also include the introduction of a senior managers regime for banks, aiming to hold individuals more directly accountable for misconduct. Targeted sanctions include: clawing back variable remuneration already paid, cancelling or cutting bonuses that have not yet been paid and also for FINMA to withdraw an individual’s fit and proper designation or impose an industry ban.

FINMA welcomes proposed reforms

In a press release, FINMA expressed strong support for the Federal Council’s proposals. “FINMA welcomes the Federal Council’s proposed measures on banking stability,” the statement read. “The Swiss Financial Market Supervisory Authority (FINMA) supports the parameters presented by the Federal Council for the preparation of the draft consultation on amendments to the Banking Act.”

FINMA particularly highlighted its support for “the planned new statutory powers for FINMA in the areas of corporate governance, early intervention, recovery and resolution, as well as the introduction of higher capital requirements for systemically important banks with subsidiaries abroad.” The supervisory authority emphasized that these measures would “significantly strengthen the resilience of the Swiss financial centre.”

In addition, FINMA should also have the power to impose fines on offending institutions.

UBS decries proposals as extreme and disproportionate

However, the proposed changes have been met with unusually vocal opposition from UBS. In a sharp reaction to the Federal Council’s announcement, UBS stated that while it “supports in principle most of the regulatory proposals,” it “strongly disagrees with the extreme increase in capital requirements that has been proposed.”

UBS further elaborated, “These changes would result in capital requirements that are neither proportionate nor internationally aligned. The proposals would require UBS to fully deduct investments in foreign subsidiaries from its CET1 capital.” The bank estimates that if the recommendations are implemented as proposed, it would be required to hold an additional estimated $24 billion in CET1 capital on a pro-forma basis, on top of the previously communicated incremental capital increase of around $18 billion following the Credit Suisse acquisition.

This significant additional capital requirement, according to UBS, would undermine the bank’s “global competitive footprint” and potentially harm the Swiss economy. The bank’s chairman, Colm Kelleher, and CEO, Sergio Ermotti, have, as reported in the FT, lobbied against the reforms, arguing that such a heavy capital burden would disadvantage UBS against its international rivals.

Next steps

The consultation process for the proposed amendments to the Banking Act will commence in stages from the autumn 2025. This will provide an opportunity for stakeholders, including banks, industry associations, and the public, to submit their feedback. The Federal Council’s dispatch to Parliament is expected in the first half of 2026, with the earliest entry into force of the new regulations projected for the beginning of 2028.

The Credit Suisse crisis underscored the potential systemic risks posed by major financial institutions to economies. Switzerland’s latest push to bolster its “too big to fail” regime reflects a determined effort to prevent a recurrence of such turmoil, even if it comes at a significant cost to its largest banking player.