UBS could get to issue cheaper bonds instead of equity to help meet new, tougher Swiss capital requirements.
That's after a committee of lawmakers backed a plan that would allow half of the new capital requirement to come in bond form.
Filippo Alloatti, head of financials for credit at Federated Hermes, said the 50-50 split was a victory for UBS, although the plans still need to pass parliamentary votes. "This is not a done deal (yet)," he said.
Switzerland is overhauling bank-capital rules for its biggest lenders after UBS had to rescue Credit Suisse in 2023.
Swiss lawmakers have told UBS it will have to hold far more capital than at present under its new banking package, to better cover the risk of a crash at one of its large subsidiaries in the U.S. and U.K. bringing down the rest of the group.
UBS has resisted the planned capital hike, saying it's not needed. Its executives have argued that Credit Suisse's demise wasn't a question of capital, but of a failed business model and weak governance.
AT1 bonds, the kind UBS would use, aim to provide an extra cushion against a bank's potential losses. They were finetuned by banks and regulators after the 2008 financial crisis and became a key part of bank capital structures. The instruments have been controversial, not least when Swiss authorities engineered a write-down of $17 billion in bonds in the Credit Suisse rescue. Bondholders in the normal credit hierarchy would have fared better than shareholders, but they ended up worse off. Many of them sued, in legal cases that are still ongoing.
