A Swiss parliamentary committee proposed allowing UBS to support its foreign subsidiaries with an equal mix of Common Equity Tier 1 and Additional Tier 1 capital, departing from the government’s stricter all-CET1 proposal. In the US, a federal court rejected SVB Financial’s $1.71 billion receivership claim after finding that damages attributable to the former parent exceeded the amount claimed. Elsewhere, US regulators narrowed the circumstances in which supervisory findings can be issued, while the Financial Stability Board highlighted sovereign debt, private credit and frontier-AI cyber risks. Switzerland’s decision to proceed with its beneficial-ownership register added a further focus on the interaction between financial-crime controls, data concentration and cybersecurity. Read more on the week's key developments. 1. Swiss committee proposes 50:50 CET1-AT1 model for UBS At an official press conference on 31 August, Erich Ettlin, president of the Swiss upper house’s Economic Affairs and Taxation Committee, said the committee had voted 10-2, with one abstention, for a model under which foreign subsidiaries would be backed with 50% Common Equity Tier 1 capital and 50% Additional Tier 1 instruments. The committee also proposed an approximately 11% CET1 trigger, below which investor distributions, share repurchases and variable remuneration would be restricted. The proposal still requires approval from both parliamentary chambers. Compared with the government’s 100% CET1 proposal, the committee’s model would reduce the common equity UBS needs to hold against its foreign subsidiaries while requiring more AT1 funding. The proposed CET1 threshold of approximately 11% would restrict distributions, share repurchases and variable remuneration if capital weakens. Parliament must decide whether that combination provides sufficient protection against losses at foreign subsidiaries. 2. FDIC defeats $1.71 billion claim tied to former Silicon Valley Bank parent In findings issued on 28 August, a US federal court ruled against a $1.71 billion claim brought by SVB Financial Trust, which holds the claims of SVB Financial Group, the former parent of Silicon Valley Bank. The court found that damages arising from aiding-and-abetting and agency liability substantially exceeded the claim and provided the FDIC with a complete set-off. The judgment matters beyond SVB’s bankruptcy estate because the FDIC’s special-assessment loss estimate assumed the full $1.71 billion claim would be paid. If the decision becomes final and unappealable, and the resulting loss estimate falls below the amount collected, the FDIC’s mechanism provides for offsets against banks’ regular deposit-insurance assessments. 3. OCC and FDIC restrict formal findings to material financial harm On 27 August, the Office of the Comptroller of the Currency and the FDIC issued a final rule defining an unsafe or unsound practice as conduct likely to cause material financial harm or a material loss to the Deposit Insurance Fund. Matters requiring attention must similarly relate to material effects on capital, asset quality, earnings, liquidity or market risk, or involve an actual legal violation. Standalone reputational concerns are excluded. By linking formal supervisory findings to material harm, the rule raises the evidential threshold for escalating documentation, policy and process weaknesses. Banks may have more scope to address non-material deficiencies outside formal matters requiring attention, but that discretion ends where shortcomings could affect capital, asset quality, earnings, liquidity or market risk. The agencies’ tailoring provision also means larger and more complex banks may experience less relief than the general wording initially suggests. 4. FSB elevates frontier-AI cyber risk in G20 warning In its 31 August letter to G20 finance ministers and central bank governors, the Financial Stability Board warned that sovereign debt fragilities, vulnerabilities in private credit and stretched asset valuations could amplify a disorderly market correction. It identified cyber risk as the most immediate financial-system concern arising from frontier artificial intelligence. The FSB’s immediate focus is operational resilience. It called for safe model deployment, robust response and recovery capabilities at financial institutions and stronger resilience among critical third-party providers. Sovereign debt, private credit and stretched valuations remain separate but potentially reinforcing sources of market stress. The letter sets a policy direction but does not establish binding requirements. 5. Bank of China’s CET1 falls as risk-weighted assets expand Bank of China’s first-half results, released on 28 August, showed its CET1 ratio falling 49 basis points from December to 12.04%, while the total capital ratio declined 54 basis points to 18.31%. Risk-weighted assets grew 6.4%. Its non-performing loan ratio improved marginally to 1.22%, but impairment losses increased 18.4%, while credit cost remained at 0.58%. Risk-weighted asset growth outpaced core-capital formation, pushing the CET1 ratio lower even as the headline non-performing loan ratio remained stable. The RMB 20 billion ($3.0 billion) AT1 issuance completed on 24 August strengthens Tier 1 loss absorption but does not rebuild CET1. Restoring the core-equity ratio while the balance sheet expands will depend on retained earnings and the pace of risk-weighted asset growth. 6. Switzerland retains 1 October transparency-register launch On 31 August, the Swiss government confirmed to Reuters that it would proceed with the 1 October launch of its central beneficial-ownership register. The commencement date had been established by the Federal Council in June, but the government faced an industry request to reconsider after hackers accessed Liechtenstein’s equivalent register. The Swiss Association of Wealth Managers warned in a 24 August letter that centralising ownership information could create an attractive cyber target. The register strengthens financial-crime controls but concentrates sensitive ownership data in one system. The breach in Liechtenstein has brought the adequacy of Switzerland’s cyber safeguards into focus before the launch. Access controls, audit trails and incident-response arrangements will face immediate scrutiny as registration begins. 7. Japan finalises 100% risk weight for qualifying bank capital contributions Japan’s Financial Services Agency finalised amendments on 24 August permitting a 100% risk weight for qualifying capital contributions made by banks. The amendments, designed to facilitate the provision of risk capital, will take effect on 31 March 2027 and include associated changes to supervisory and Pillar 3 disclosure rules. The amendment makes eligibility classification a material capital-allocation decision. Qualifying investments will consume less regulatory capital than they would under the otherwise applicable equity treatment, but the change does not provide blanket relief for banks’ shareholdings. Its effect should therefore be assessed through changes in eligible equity exposures and associated risk-weighted assets, rather than assuming that banks will broadly expand corporate-equity investment. 8. China Construction Bank raises RMB 50 billion in TLAC debt China Construction Bank announced on 25 August that it had completed a RMB 50 billion ($7.4 billion) issuance of non-capital total loss-absorbing capacity bonds. The transaction comprised RMB 35 billion of four-year bonds callable after three years and RMB 15 billion of six-year bonds callable after five years. The proceeds will be used to improve the bank’s total loss-absorbing capacity. The issuance adds gone-concern loss-absorbing resources without diluting common shareholders or increasing going-concern CET1. Its callable structure, however, creates refinancing decisions after three and five years, making continued access to wholesale funding relevant to the durability of the buffer. Because CCB did not provide a pro forma TLAC ratio, the transaction’s size does not by itself show how far the bank now sits above its regulatory requirement. 9. Cboe extends clearing framework to fixed-income securities finance Cboe Clear Europe updated its securities-financing clearing rules from 24 August, following its earlier announcement that fixed-income coverage was expected to begin that day. The framework covers eligible European, Swiss and UK government and corporate bonds, as well as selected US securities for non-US participants. Central clearing can reduce counterparty risk-weighted assets through novation and multilateral netting, but it also creates margin, liquidity and default-fund obligations for participants. Cboe disclosed no fixed-income volumes during the period, leaving the practical capital benefit dependent on adoption, netting efficiency and actual balance-sheet savings. 10. EBA proposes testable operational-risk controls under CRR3 On 26 August, the European Banking Authority opened consultation on draft regulatory technical standards under Article 323 of the Capital Requirements Regulation. The standards would establish harmonised and proportionate governance, processes and systems for identifying, assessing, monitoring and managing operational risk. Comments are due by 31 December 2026. The proposal would make operational-risk governance more consistently testable across institutions. Banks with fragmented loss data, inconsistent risk classifications or weak validation may need to strengthen their controls, although the standards do not change the operational-risk capital formula. Supervisors would assess whether risk identification, measurement, escalation and management decisions can be traced through consistent data and documentation.
