Swiss lawmakers advance UBS capital compromise to upper house

Switzerland’s parliament is moving closer to softening the capital rules that were supposed to be the country’s big lesson from the Credit Suisse collapse. A compromise on UBS’s capital requirements is heading to the upper house, the Council of States, after gaining traction in committee deliberations that could reshape how much financial armor the country’s last megabank needs to carry. The original plan, drawn up in the wake of Credit Suisse’s 2023 implosion, would have required UBS to hold 100% Common Equity Tier 1 capital against its foreign subsidiaries. Under that framework, UBS was looking at raising roughly $20B in additional CET1 capital. The compromise on the table The revised proposal would lower the CET1 requirement for foreign subsidiaries to somewhere in the range of 70-80%. At the 80% threshold, UBS’s additional capital burden drops to approximately $15B. The compromise would allow UBS to use Additional Tier 1 instruments, commonly known as AT1 bonds, to fill part of the capital gap. AT1s are a hybrid form of capital: they look like bonds most of the time, paying coupons to investors, but they convert to equity or get written down if a bank hits serious trouble. Supp...