UBS chairman calls Swiss committee’s AT1 proposal an acceptable compromise

UBS Chairman Colm Kelleher called a Swiss parliamentary committee’s proposal on capital backing for foreign subsidiaries an acceptable compromise the bank could live with. The proposal would allow half of the requirement to be met with common equity tier one capital and up to half with additional tier one instruments. It differs from the government’s plan to require full CET1 backing. The committee proposal has not become law.

UBS estimated that the compromise would require about $13 billion of additional Tier 1 capital, plus about $2 billion of CET1 linked to earlier regulatory changes. The bank said its cumulative additional capital burden since the Credit Suisse acquisition would be about $30 billion under that approach. These are UBS estimates rather than final regulatory calculations.

PARLIAMENTARY DECISION REMAINS PENDING

The Swiss Council of States postponed its decision on the stricter capital rules until the following week. Swissinfo reported that no decision had been taken on 17 September.

The debate centres on how a parent bank should capitalise foreign subsidiaries and how much loss-absorbing capacity must be held in the highest-quality form.

CAPITAL MIX SHAPES THE BANK’S BURDEN

UBS has argued that the government’s original approach would impose a larger burden and affect its competitiveness. Kelleher also warned that UBS could rethink its Swiss base if the rules were too harsh, Reuters reported.

The next milestone is renewed consideration by the Council of States. Any parliamentary amendment would then need to move through the remaining legislative process before taking effect.