Three years on: Switzerland’s strength lies in balance, not excess

Three years ago, Switzerland faced one of the most difficult moments in its modern financial history with the rescue of Credit Suisse - a chapter that is now nearing closure, following the completion earlier this week of the final migration of Swiss clients to UBS.

I want to recognize what has been achieved since March 2023. From stabilizing the financial system at a moment of acute crisis to completing a highly complex client migration, the scale of delivery has been substantial - and far from inevitable. These achievements were made possible by the extraordinary commitment and professionalism of all my colleagues across UBS, working closely with authorities in more than 50 jurisdictions and with other partners. Their efforts now allow us to focus on the future: serving clients, investing in innovation, and building sustainable growth.

When Credit Suisse could no longer continue on its own three years ago, the priorities were clear: to protect clients and taxpayers and preserve financial stability at the lowest possible cost to the broader economy. Decisions had to be taken quickly, under extreme pressure and with imperfect information. Switzerland acted decisively and responsibly. UBS was an integral part of that solution and helped to protect the country’s reputation.

This milestone comes as Switzerland enters the most decisive phase yet in reshaping its regulatory framework - a process that will have a profound impact on the future of the Swiss financial center. I have always stressed the importance of drawing critical lessons from the Credit Suisse collapse, a tragic moment for the Swiss financial center. That is why UBS has supported most of the reform proposals.

Switzerland has never thrived by seeking attention. Its strength lies in quieter virtues: pragmatism, institutional discipline, and a democratic system in which institutions and policymakers have a duty to listen and give those affected a voice.

The fact that Switzerland punches well above its weight internationally is no accident. It reflects long-term strategy and sound decision-making. Decisiveness in crisis, combined with restraint and openness to debate afterwards, is not a weakness. It is a defining feature of Swiss economic success.

Time for measured reflection

The actions taken during that March 2023 weekend commanded global respect. Yet much of that confidence has since been eroded by a regulatory debate that has focused too heavily on risks and fearmongering, rather than sober, fact-based analysis. What is needed now is self-reflection and courage - not fear.

What should follow the various analyses after the crisis is a targeted, balanced and proportionate approach to reform - one that strengthens resilience while preserving what has long served Switzerland well: openness, credibility and a financial sector that attracts international capital and savings. This matters because it helps keep borrowing costs lower than in many neighboring countries. Compared to Germany, for example, the average interest rate on a Swiss mortgage is about 2.5 percentage points lower - a tangible benefit for households, businesses and long-term growth.

Even if financial stability ranks only 39th out of 41 among Swiss residents’ primary concerns in the annual “worry barometer” survey, a stable financial system is far from an abstract concept. Its effects are concrete: the terms on which families finance their homes, whether businesses can invest and hire, and whether exporters and pension funds can plan with confidence. Any debate on capital and regulation must therefore be grounded in how the financial system serves the real economy, and at what cost - rather than in symbolism or punitive measures.

Separating fact from assumption

Strengthening the financial system also requires separating facts from assumptions and avoiding reforms that overshoot the mark. Several widely held assumptions in the current debate therefore deserve clarification.

There is currently no general credit contraction in Switzerland. However, as the Swiss National Bank noted in December, banks’ funding costs have risen in recent years, partly due to regulatory tightening, including the implementation of stricter liquidity rules specifically for large Swiss banks. Together with other factors, this has increased the cost of providing credit, with the effects most visible in the mortgage market and in the financing of small and medium-sized enterprises.

Higher regulatory requirements are not borne by shareholders or international clients alone. Swiss clients feel them too. The proposed changes to the capital framework will inevitably add further pressure to the cost of credit. To avoid unnecessary consequences, new rules must strike a healthy balance between stability, growth and affordability. They should strengthen safeguards where they are most effective, remain aligned with international requirements and ensure that Switzerland continues to be a place where a strong financial sector can operate globally and contribute to prosperity. This also means avoiding unnecessary “Swiss finishes” that impose economic costs for everyone without commensurate benefits.

Proportionate, internationally aligned rules can bolster stability without undermining competitiveness or driving business elsewhere. This is also reflected in the feedback from last year’s two government-sponsored public consultations on proposed regulatory changes: broad support for greater resilience, combined with overwhelmingly clear concern about measures that are not targeted, proportionate or internationally aligned.

Finally, financial stability depends on more than capital levels alone. A competitive business model that delivers sustainable profitability over the economic cycle remains the true first line of defense for taxpayers in any stress scenario. Liquidity requirements, credible recovery and resolution planning, and effective supervision also play an essential role. Strong oversight is indispensable to support confidence but works best when it is clear, predictable and balanced.

In recent months, there have also been suggestions that loss-absorbing instruments, such as Additional Tier 1 (AT1) capital, are being abandoned internationally. This is not the case. AT1 instruments remain a standard component of regulatory capital across all major peer jurisdictions. The lesson from recent crises is not to remove these instruments, but to ensure they are robust and aligned with international best practice. During the March 2023 crisis, AT1 instruments played a crucial role in stabilizing Credit Suisse and enabling its restructuring. Without them, it is doubtful any bank would have been able to step in.

Another assumption is that the implementation of Basel III has resulted in a net reduction of capital at UBS. The opposite is true. UBS was required to prepare for Basel III over many years, building up additional capital well ahead of its full introduction. Between 2016 and 2024, this process added around USD 70 billion of risk-weighted assets. Even after the release in the first quarter of 2025 of a conservative buffer of nearly 9 billion, the overall effect of Basel III was a net increase of around 14% in RWAs, translating into more than 8 billion of additional capital - despite no change in underlying risk.

It is also incorrect to suggest that Switzerland is inadequately regulated. Switzerland already applies internationally leading capital and liquidity standards for comparable activities, including substantially higher requirements for systemically important banks that increase with size and market share. Other jurisdictions that are reassessing their frameworks to ensure the rules are targeted, proportionate and economically justified are not engaged in “a race to the bottom.”

Lastly, it is now clear that the core problem in the Credit Suisse crisis was not a lack of rules or insufficient capital requirements. It was the failure to address persistent weaknesses in time - including through far-reaching regulatory concessions in the treatment of foreign subsidiaries - and a lack of clear and early communication that would have allowed market discipline to work.

Software, deferred tax assets and foreign subsidiaries

This context is essential when assessing proposals such as full CET1 deductions for software or deferred tax assets (DTAs) at group level. These measures are disproportionate, not internationally aligned and based on incorrect assumptions about past write-downs. Before UBS’s emergency takeover of Credit Suisse, no significant software write-downs were required despite years of stress. During the integration, UBS wrote down Credit Suisse software only where overlapping systems already existed. Had Credit Suisse been restructured independently, any write-downs would have been limited to specific affected business areas - not applied across the board.

The same applies to deferred tax assets. Credit Suisse’s DTA write-downs in the third quarter of 2022 reflected management’s decision to scale back parts of the Investment Bank. In subsequent quarters, the exit from those activities improved capital ratios as RWAs were reduced. This demonstrates that DTAs can retain value even in a crisis.

Similar logic should also guide the discussion on the capital treatment of foreign subsidiaries. No major financial jurisdiction requires parent banks to fully deduct investments in foreign subsidiaries from their core capital without providing substantial corresponding relief. The idea that unilateral rules of this kind would not affect Swiss clients is misleading. They would be felt by exporters, entrepreneurs and businesses that depend on competitive access to global markets and services provided by UBS’s international subsidiaries.

Taken together, this helps to explain why these proposals were widely criticized by industry, cantons and business groups during last year’s public consultations, and why the economic committees of both houses of Parliament have called for internationally consistent rules.

More than banking at stake

Rigorous, fact-based debate and parliamentary scrutiny are essential - especially when the stakes are high. They help distinguish evidence from assertion and lead to durable solutions. This matters particularly in the current debate, because its consequences will reach far beyond banking alone.

Switzerland’s financial center - encompassing banks, insurers, asset managers, venture capital and commodity firms - delivers significant benefits to the country. It accounts for a meaningful share of jobs and economic output. Over recent years, around one-third of corporate tax revenues have been generated by the sector. Financial services also support jobs across the country, underpin pension systems, facilitate trade and help Swiss businesses compete globally.

As Group CEO of UBS, I am deeply aware of the responsibility our institution carries. The events of March 2023 placed exceptional demands on many people - including colleagues at UBS, public authorities, regulators and others who acted together in the country’s interest. With that responsibility comes humility, transparency and a commitment to engage constructively with policymakers and society. UBS’s proven, successful and sustainable business model should not be penalized.

Three years after the rescue of Credit Suisse, Switzerland is looking ahead - and so must UBS. Rapid technological change, including the swift advance of artificial intelligence, demands agility, particularly as our clients navigate a global economy marked by heightened uncertainty and geopolitical tension.

Lasting stability requires proportion, consistency and international alignment - not measures that may feel reassuring in the short term but weaken Switzerland’s resilience and competitiveness over time. Getting this balance right will be essential to safeguarding both the strength of the financial center and the broader prosperity of our country. Stability and prosperity must never be taken for granted.