UBS Group AG warned that proposed Swiss banking reforms could pose a risk to the national economy, as calls grow for the government to soften its plans.

In its formal response on Monday, Switzerland’s largest lender said that requiring full equity backing for foreign subsidiaries, if implemented as proposed, would “place a heavy burden on the Swiss economy” and “jeopardise the continuation of the successful UBS business model.

Switzerland’s largest bank has opposed the reform package since it was unveiled in June last year, warning it could increase UBS’s capital requirements by up to $26 billion.

The plan’s future now looks uncertain after the Swiss parliament’s largest party, the SVP, last week supported an alternative proposal first circulated in December, Bloomberg reports.

Furthermore, last month, several Swiss lawmakers suggested allowing UBS to use a form of junior debt, known as AT1 bonds, to cover up to half of the new foreign subsidiary requirement.

The announcement sent UBS’s share price to a 17-year high, as investors bet it could lead to a more lenient reform package.

UBS stated that the alternative proposal is moving “in a more constructive direction than the government’s extreme approach.” The bank has estimated that the requirement for full equity backing of foreign subsidiaries would create roughly $23 billion in additional capital needs.

On Monday, the Swiss Banking Association also voiced its opposition to the government’s proposals.

“Implementing the planned measure would make doing business abroad more expensive, either directly or indirectly, for all banks in Switzerland. It would be harmful to the entire banking sector, the financial centre as a whole and Switzerland’s real economy,” the organisation stated.

The Swiss government has argued that the collapse, and subsequent acquisition by UBS, of Credit Suisse three years ago demonstrated that existing banking regulations provide inadequate protection against crises and need strengthening.

While UBS acknowledges the need to learn from past regulatory shortcomings, it maintains that the proposed reforms are misguided.

The consultation period for the legislation, which includes the capital backing requirement for foreign subsidiaries, ended on Friday. The measure is now expected to be debated in the Swiss parliament next year.

Moreover, the Swiss government plans to reduce the portion of balance sheet items, such as software and deferred tax assets, that can be counted as equity. These measures, which could be implemented by decree, are expected to increase UBS’s capital requirements by around $3 billion.