Swiss Banking Act revision on capital for foreign subsidiaries

A systemically important bank is one whose failure would put the wider economy at risk. In Switzerland such a bank can be the parent of a group with subsidiaries abroad, and it holds shares in them, called participations, on its own balance sheet. The Banking Act revision sent to Parliament on 22 April 2026 requires these banks to back such participations fully with Common Equity Tier 1 (CET1) capital, the highest-quality form of capital (Federal Council (external site)).

The Federal Council links the proposal to a gap in the current rules: a loss in value of a foreign subsidiary reduces the capital ratios of the Swiss parent bank directly (Federal Council (external site)).

Under current rules, participations in foreign subsidiaries are only partly backed with capital at the level of the parent bank. In the consultation draft of 26 September 2025, the CET1 backing amounted to 65 percent when the provision entered into force and rose by 5 percentage points a year until it reached 100 percent (Federal Council consultation (external site)). The dispatch keeps a transition period of seven years (Federal Council (external site)).

As an example only, using the consultation schedule: for a participation with a carrying value of CHF 20 billion, the parent would hold CHF 13 billion of CET1 capital against it in the first year, CHF 14 billion in the second year and CHF 20 billion at the end of the phase-in (Federal Council consultation (external site)).

The text can still change in Parliament. The Economic Affairs and Taxation Committee of the Council of States proposed a variant that also counts Additional Tier 1 (AT1) instruments for up to 50 percent (committee press release (external site)).

The revision applies to systemically important banks in Switzerland that hold participations in foreign subsidiaries (State Secretariat for International Finance (external site)). The roles most directly concerned:

• Capital Reporting Analyst: calculates the CET1 backing for each participation at each step of the phase-in.
• Regulatory Reporting Analyst: reports the parent bank's capital ratios under the new treatment.
• ALM Analyst: reflects the capital needed at parent level in balance sheet plans.
• Regulatory Consultant (Banking): compares the capital effect of the Federal Council text and the committee variant.

The Federal Council put the capitalisation of foreign participations to consultation on 26 September 2025 (Federal Council consultation (external site)). It adopted the dispatch on 22 April 2026 and intends a transition period of seven years if the parliamentary deliberations proceed without delay (Federal Council (external site)).

The Economic Affairs and Taxation Committee of the Council of States, the first chamber, published its proposals for the debate in that chamber on 31 August 2026 (committee press release (external site)). The National Council decides after it, and no date of entry into force is set yet.

A separate package on governance, supervision and liquidity was put to consultation on 12 August 2026, until 19 November 2026 (Federal Council (external site)).

The Swiss rules for banks that are too big to fail set higher capital and resolution requirements for systemically important banks (State Secretariat for International Finance (external site)). The Federal Council's report on banking stability of April 2024 reviewed these rules and proposed changes, including on capital (report (external site)).