- Credit Suisse’s 2023 failure triggered a review of Switzerland’s rules for systemically important banks and the capital treatment of foreign subsidiaries.
- The Federal Council developed an explanation linking subsidiary losses to parent-bank resilience and proposed full CET1 backing.
- Parliamentary review broadened the Search stage through regulator, stakeholder and expert participation and consideration of alternative CET1 and AT1 structures.
- The committee’s 31 August 2026 proposal represents a Decision within a larger institutional process that still requires further parliamentary action.
- The case illustrates decision governance as a sequence of connected decisions in which authority, participation, evidence, alternatives and implementation evolve over time.
The debate over capital requirements for UBS can be read as a sequence of events in a decision process.
The five-stage decision process describes decision making as a progression from Reaction to Explanation, Search, Decision, and Action. Reaction begins when an event, observation, or change creates a perceived need to act. Explanation develops an account of the situation, its causes, and why intervention may be necessary. Search identifies possible courses of action, relevant evidence, expected outcomes, assumptions, and criteria for comparing alternatives. Decision is the commitment to one option, including any conditions attached to that choice. Action translates the commitment into implementation and produces outcomes that can subsequently provide information for evaluating the decision and improving future decisions. Decision governance influences each stage by determining who participates, who has authority, what information is required, how alternatives are considered, and how the reasoning and resulting commitments are recorded.
Using the five-stage model of Reaction, Explanation, Search, Decision and Action, the case shows how a major public policy decision develops over time, how different actors enter the process, how alternatives emerge, and how authority is exercised.
Credit Suisse fails
In March 2023, Credit Suisse entered a crisis that resulted in its acquisition by UBS.
The transaction was supported by the Swiss authorities as part of an effort to contain risks to the financial system.
In decision-process terms, this event created the Reaction.
A situation had become observable that required attention from government, regulators and Parliament. The relevant question was no longer only how to manage Credit Suisse. It also became whether the existing Swiss framework for systemically important banks had been sufficient.
The failure therefore created information that could be used in later decisions about the regulatory framework.
Authorities investigate the causes
After the crisis, Swiss authorities reviewed the operation of the country’s too-big-to-fail regime.
One issue identified by the Federal Council concerned the treatment of foreign subsidiaries of systemically important banks.
Under the existing arrangement, changes in the value of foreign subsidiaries could affect the capital position of the Swiss parent. During a crisis, this could constrain the parent at the same time that it might need financial capacity to stabilize the group or dispose of subsidiaries.
This represents the Explanation stage.
The observed event was connected to a causal account. The policy problem was not described simply as insufficient regulation. A more specific relationship was proposed between the capital treatment of foreign subsidiaries and the resilience of the parent bank.
This explanation then provided a basis for defining possible interventions.
The Federal Council develops a proposal
The Federal Council proposed that the full value of foreign subsidiaries should be backed by Common Equity Tier 1 capital, or CET1, at the Swiss parent.
The proposal translated the preceding explanation into an option.
It was intended to reduce the extent to which losses in foreign subsidiaries could weaken the parent company.
The proposal also had consequences beyond financial resilience. UBS and representatives of the financial sector argued that additional capital requirements could affect financing costs, the organization of the bank and the competitiveness of Switzerland as a financial centre.
At this point, the decision contained several intended outcomes and consequences that could potentially conflict.
These included financial stability, protection from future state exposure, the resilience of UBS, and the international competitiveness of the bank and the Swiss financial sector.
The decision therefore involved more than a single criterion.
The issue moves into parliamentary consideration
The proposed changes entered the parliamentary process.
The Economic Affairs and Taxation Committee of the Council of States considered the proposal and heard from several participants.
These included representatives of the Swiss National Bank, FINMA, UBS, cantons, business organizations and external experts.
This expanded the information available during the Search stage.
Different participants contributed different forms of information.
Regulators could provide information about financial stability and supervision.
UBS could provide information about how different capital structures might affect the bank.
Cantons and business organizations could provide information about wider economic consequences.
External experts could introduce interpretations that were not directly tied to the organizations implementing or affected by the policy.
In decision governance terms, the participation structure increased the number of information sources involved in the decision.
Alternatives are developed
The parliamentary committee did not limit its consideration to accepting or rejecting the Federal Council proposal.
Alternative capital structures were discussed.
These included the Federal Council position based on full CET1 backing, proposals involving lower CET1 requirements, and combinations of CET1 and Additional Tier 1 capital, or AT1.
By August 2026, several positions were visible.
The Federal Council continued to support full CET1 backing.
Some members of the parliamentary committee supported a structure close to 90 percent CET1.
The committee majority supported an arrangement under which AT1 could provide up to half of the required capital backing.
This is the Search stage in a more developed form.
The initial proposal had become an option set.
The alternatives differed not mainly in the intended objective of strengthening capital backing, but in the mechanism and degree through which that objective would be achieved.
The decision therefore moved from a question of whether additional capital backing was needed toward a question of how that backing should be composed.
Additional analysis is requested
During the parliamentary process, the committee requested additional analysis from the administration and the Federal Office of Justice.
This introduced another governance mechanism into Search.
The decision was not based only on preferences expressed by participating stakeholders. Administrative and legal analysis was requested before the committee proceeded.
The process therefore combined stakeholder participation with specialized review.
This is relevant to governance fitness because the decision had several characteristics that can justify additional review: high financial consequence, regulatory exposure, uncertainty, technical complexity and potentially large effects on stakeholders.
The committee selects a position
On 31 August 2026, the Economic Affairs and Taxation Committee of the Council of States adopted a proposal under which AT1 capital could provide up to 50 percent of the backing required for foreign subsidiaries.
The remainder would be provided through CET1.
The proposal also included mechanisms affecting distributions, share repurchases and variable compensation if capital fell below specified levels.
This event represents the Decision stage.
A particular option was selected from the alternatives under consideration.
The committee described the proposal as a compromise intended to combine stronger capital backing with considerations relating to competitiveness.
The decision was made within the authority allocated to the parliamentary committee, but it did not conclude the wider legislative process.
The committee’s decision therefore represents a commitment within a larger sequence of decision rights.
Other actors respond
After the committee decision, other participants continued to state their positions.
UBS indicated that the proposed structure would still require substantial additional capital, although less of it would need to be CET1 than under the Federal Council proposal.
The Swiss finance minister expressed concerns about aspects of the committee proposal, including legal and practical questions raised by regulatory experts.
These responses became new decision information.
They could affect subsequent parliamentary deliberation.
This illustrates that the five stages do not necessarily occur only once.
A decision made at one level can create a new Reaction or new Search activity at another level.
In institutional settings, decision processes are often nested.
The committee makes a decision, Parliament then considers that decision, and subsequent implementation decisions follow if legislation is adopted.
The proposal moves toward further decision
The committee proposal is not yet the final rule.
It must proceed through the remaining legislative process.
The Action stage is therefore only partly visible.
Some implementation arrangements have already been discussed, including transition periods, capital thresholds and restrictions that would apply under specified conditions.
However, implementation cannot be observed until a final rule is adopted and applied.
The eventual behavior of UBS, regulators, investors and other affected actors will then create additional information about the effects of the decision.
Interpreting the case through decision governance
The case can be represented as a sequence:
Reaction: Credit Suisse fails and exposes questions about the existing regulatory framework.
Explanation: Authorities develop an account linking the treatment of foreign subsidiaries to the resilience of the Swiss parent.
Search: Regulatory proposals are developed, stakeholders and experts participate, and alternative capital structures are considered.
Decision: The parliamentary committee selects a structure allowing up to 50 percent AT1 backing.
Action: The proposal proceeds through legislation, after which implementation arrangements may take effect.
Several decision-governance mechanisms are visible across these stages.
Authority is distributed among the Federal Council, regulators, parliamentary committees and Parliament.
Participation includes organizations with different expertise, interests and information.
Evidence requirements include regulatory analysis, administrative analysis and legal review.
Alternative generation occurs before commitment.
The decision also contains multiple intended outcomes and several forms of uncertainty.
The case therefore illustrates decision governance as the design and operation of arrangements around a decision process rather than as a single approval event.
It also shows how a public decision can evolve through several connected decision processes.
The failure of Credit Suisse generated information.
That information contributed to an explanation.
The explanation produced a regulatory proposal.
The proposal triggered a wider search among alternatives.
A parliamentary decision then created new information and further decisions.
The process continues until legislation is adopted, implemented and its outcomes become observable.
At that point, the same case can be examined again through outcome assessment and decision learning: which assumptions were supported, which consequences occurred, and what information from this decision should influence future regulation.
References
- Federal Council of Switzerland. Too-big-to-fail regulations: Federal Council adopts dispatch and Capital Adequacy Ordinance. 22 April 2026.
- Economic Affairs and Taxation Committee of the Council of States. Parliamentary proceedings concerning capital backing of foreign participations of systemically important banks. 2026.
- Economic Affairs and Taxation Committee of the Council of States. Systemically important banks: committee presents compromise on capital backing of foreign participations. 31 August 2026.
- Reuters. Reporting on the Swiss parliamentary committee’s UBS capital proposal, 31 August and 1 September 2026.