Swiss Committee Backs UBS Use of AT1 Bonds for Capital

The Economic Affairs and Taxation Committee of the Swiss parliament's upper house recommended that UBS Group AG be permitted to use Additional Tier 1 (AT1) convertible bonds to cover approximately half of its $20 billion in new capital requirements. This move follows a government push for stricter regulations after the collapse of Credit Suisse.

To address reliability concerns raised by the Swiss Finance Ministry, lawmakers proposed reforms to the AT1 instruments. These reforms include triggers that would limit dividends, bonuses, and coupon payments earlier during stress situations to ensure the bonds effectively absorb losses.

While the recommendation may protect profitability metrics and lower compliance costs for the bank, the proposal must still undergo a legislative process. A final vote is scheduled for the upper house's autumn session, running from September 14 to October 2. Erich Ettlin, president of the committee, stated that the solution would "serve Switzerland" and "is no victory for UBS."