After The Merger: UBS Faces New Hurdles From Bern's Reform Agenda

When UBS stepped in to rescue Credit Suisse in March 2023, it was hailed by Swiss officials as a stabilising force—one capable of preserving the country’s financial reputation in the face of a global banking crisis. But nearly eighteen months on, that same institution now finds itself the target of a sweeping reform agenda set to be unveiled by the Swiss government. For UBS, the merger may be complete, but the next challenge is just beginning: navigating the regulatory and political backlash that followed its elevation to national champion.

A Crisis That Shook the Swiss Banking Model

The collapse of Credit Suisse was more than a financial event—it was a political and institutional rupture. Once one of Switzerland’s most prestigious banks, its failure exposed deep governance failures and triggered widespread public discontent. The emergency merger engineered over a single weekend was designed to avert market panic, but it also sparked anger over the lack of democratic oversight, the speed of the decision, and the perceived impunity of senior executives.

In the months since, politicians from across the spectrum have called for a wholesale rethinking of Switzerland’s financial regulatory architecture. The upcoming reform proposals—due Friday—are the culmination of those demands.

UBS’s New Role: Too Big, Too Central

The merger has left UBS as the only globally systemically important bank (G-SIB) based in Switzerland. With a combined balance sheet exceeding the country’s GDP, UBS is now more central to the Swiss economy than any other private enterprise. This position brings with it both influence and intense scrutiny.

Public expectations have shifted. UBS is now seen not merely as a private institution but as an entity with quasi-public responsibilities. Policymakers want assurance that the country will never again be forced into an emergency bailout. But UBS, for its part, remains a listed, profit-driven firm with global shareholders and ambitions to expand its investment banking and asset management arms.

The tension between national interests and corporate strategy is becoming harder to ignore.

Inside the Reform Package

While final details remain confidential until Friday’s release, several measures have already been signalled by lawmakers and regulators:

• Stricter Capital Requirements: UBS may be asked to hold significantly more capital than its global peers to offset its enlarged risk profile.

• Limits on Investment Banking Activities: The government may recommend capping proprietary trading and curbing risk-taking in non-core markets to prevent future shocks.

• Resolution Planning: New rules could demand a more robust “living will” to allow for an orderly resolution of UBS without resorting to taxpayer support.

• Governance and Pay Oversight: Executive remuneration, dividend policy, and internal risk controls could all come under stricter scrutiny.

• Swiss Ringfencing: Some proposals may call for a clearer separation between UBS’s Swiss operations and its international business lines to protect domestic retail deposits.

All of this is aimed at strengthening systemic safeguards—but at a cost to UBS’s flexibility and growth prospects.

Strategic Implications for UBS

For UBS executives, these proposals represent more than just regulatory tightening. They threaten to interfere with the bank’s post-merger roadmap, particularly its ambitions in global wealth management and investment banking.

Capital restrictions could limit share buybacks and dividend distributions, frustrating institutional investors. Constraints on the investment bank—especially after absorbing key Credit Suisse units—could hamper profit generation in high-growth markets. And if Swiss regulations begin to diverge from international norms, UBS may find itself at a competitive disadvantage versus rivals in the EU, UK, or US.

Internally, this creates pressure on morale and talent retention. Senior executives are wary of being seen as public servants rather than stewards of a global franchise.

UBS Pushes Back

The bank is not sitting idle. In recent weeks, UBS has stepped up its engagement with policymakers, arguing that over-regulation risks neutering its global competitiveness. Chairman Colm Kelleher and CEO Sergio Ermotti have both warned against a kneejerk response that penalises success and limits innovation.

UBS has also reminded the public of the role it played in stabilising the Swiss banking system at a critical moment. In their view, the rescue of Credit Suisse was a service, not a favour to be repaid with constraints. The bank’s lobbying, both directly and through Swiss financial associations, is aimed at shaping the final form of the reforms—preferably in ways that acknowledge its unique international profile.

The Swiss Government’s Dilemma

The federal government now faces a balancing act. On one hand, it must restore public confidence and ensure that no institution can again threaten the Swiss economy. On the other, it cannot afford to undermine UBS’s ability to operate as a world-class financial institution.

Politically, the stakes are high. The Credit Suisse collapse energised a wave of populist sentiment, particularly among voters who viewed the financial sector as unaccountable. With federal elections looming, officials are under pressure to deliver a visible reckoning for what went wrong.

At the same time, any move that weakens UBS or drives parts of its operations abroad could have economic consequences, from lost tax revenue to diminished international standing.

A Moment of Reckoning for Swiss Finance

Switzerland’s reputation as a stable, well-regulated banking centre is being redefined. The country’s model—built on discreet banking, global reach, and institutional trust—was shaken by the Credit Suisse debacle. The reform package is intended to shore up that model, but it may also reveal how much the financial landscape has changed.

UBS, once a peer among several large Swiss banks, is now the only one left standing. It faces the dual task of absorbing its rival’s legacy and defending its own autonomy. How it manages the political and regulatory fallout over the coming months will determine not only its trajectory, but the broader future of Swiss finance.

Conclusion

For UBS, the real test comes not from the markets, but from Bern. The reforms being shaped now could impose lasting structural changes on the bank’s operations and strategy. As Switzerland seeks to ensure that “too big to fail” never again becomes a crisis point, UBS must adapt to its new role—not just as a global bank, but as a cornerstone of national economic stability.

The post-merger era is not a return to business as usual. It is a new chapter, and one in which the rules are still being written.

Author: Brett Hurll