UBS Capital Compromise Plan Gets Backing of Largest Swiss Party
The largest party in Switzerland’s parliament backed a compromise proposal in the ongoing debate over ’s capital requirements, bringing the prospect of a deal to defuse the standoff a step closer.
In a consultation document seen by Bloomberg News, the Swiss People’s Party, SVP, said it supported a proposal circulated in December by a cross-party group of lawmakers, in which UBS could use convertible bonds known as AT1s to meet some of the new capital requirements. The suggestion — which sent UBS stock to a 17-year high — would substantially cut the need for new equity capital that UBS is facing.
Support by the SVP, which holds about a third of seats in the lower house, increases the chances of the final regulation being more favorable to UBS than the government’s current position which foresees a rise in capital requirements of about $26 billion. UBS took over its ailing rival Credit Suisse in 2023, an event which prompted a regulatory overhaul aimed at preventing another such collapse.
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UBS has strongly criticized the government’s stance, arguing it will make the bank internationally uncompetitive.
The consultation document is due to be submitted on Thursday, as part of a process in which stakeholders can comment on the government’s proposals. It is not certain that all lawmakers will follow the party’s line, and changes are possible to the document before it is submitted.
The party also called on the government to formally evaluate a proposal made last year to force UBS to dispose of its US units. This idea had been previously floated by former minister and influential party figure Christoph Blocher.
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The AT1 plan was proposed last month by a group of individual senior lawmakers from several center-right parties including the SVP. AT1s are a cheaper form of capital, and according to the compromise proposal can be used for up to 50% of the extra amount required by the government’s demand that UBS fully back its foreign units at the parent bank.
Switzerland’s finance ministry will collate all entries to the consultation procedure and provide the government with a recommendation on whether to change the current draft of the law. The government is set to decide on the final shape of the draft which it will present to the parliament in the first half of this year. Lawmakers will have the final say, although the legislation can theoretically be challenged in a referendum.