UBS Capital Decision Postponed by Swiss Parliament Committee

(Bloomberg) — Swiss lawmakers postponed an interim vote on proposed changes to UBS Group AG’s capital requirements, extending uncertainty over how far they are prepared to dilute the government’s planned overhaul of financial regulation.

The Economic Affairs and Taxation Committee of parliament’s upper house didn’t vote on the matter on Tuesday and will resume its deliberations at its next meeting on Aug. 31, according to a parliament spokesperson.

The delay means UBS will have to wait longer for the first official indication of how lawmakers plan to alter a government proposal that could require the bank to hold about $20 billion more of its highest-quality equity capital.

Committee president Erich Ettlin, a centrist lawmaker, told journalists after the meeting that lawmakers discussed allowing UBS to fulfill part of those capital requirements using so-called AT1 bonds instead of more expensive forms of capital.

“The core question is, do AT1s work for this and if so, to what extent can they be used?,” Ettlin said, adding that any potential changes would need to be accepted by international markets. “We want AT1s, which are accepted in an international context. Otherwise, they’re useless.”

UBS supporters in parliament, broadly from the center-right, have rallied behind the proposal, which features additional safeguards intended to strengthen the loss-absorbing abilities of the bonds, people familiar with the matter have said.

That includes banning coupon payments on the bonds and payouts to shareholders if the bank’s capital ratio drops below a certain level, addressing a problem which arose during Credit Suisse’s demise.

Investors in AT1 debt are wary of the Swiss proposal, both on the basis that it would generate more issuance and that changes to bond terms would complicate payments to holders. UBS is already one of the world’s largest issuers of the debt.

Credit Suisse

The government’s plan emerged in the aftermath of Credit Suisse’s collapse over three years ago. The committee’s response is only one step in a lengthy legislative process that’s not expected to conclude before next year.

The finance ministry has proposed making UBS hold the full book value of its foreign units in equity capital at home, a measure that the bank has lobbied strongly against since it was first floated in 2024.

While it looks likely that the government’s proposal will be watered down, there’s also broad consensus among lawmakers that capital requirements should rise from their current level.

UBS shares were little changed, down 0.6% at 2:30 p.m. in Zurich.

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