UBS wins partial relief as Swiss lawmakers back AT1 compromise on capital rules

Swiss lawmakers handed UBS a meaningful victory this week, advancing a compromise proposal that would let the country’s largest bank satisfy up to half of its new foreign-subsidiary capital requirements using Additional Tier 1 bonds rather than the more expensive common equity the government originally demanded. The Economic Affairs and Taxation Committee is pushing the compromise forward, with an upper house vote on the broader capital package scheduled for August 31, 2026. Final legislation may not clear parliament until late 2026 or into 2027. What the numbers actually mean The Swiss government’s original post-Credit Suisse proposal required UBS to back its foreign subsidiaries entirely with CET1 capital. That represented a significant tightening from the prior rule, which required roughly 60% backing. The full CET1 requirement was estimated to cost UBS around $20 billion in additional high-quality capital. The compromise halves that burden at a stroke. Because AT1 bonds carry a yield of around 7%, compared to UBS’s estimated 10% cost of equity, the swap is not just symbolic. Analysts estimate that with AT1 inclusion, the new CET1 requirement drops to approximately $400 million,...