UBS Capital Rules Eased in Switzerland, Boosting Bank's Competitiveness

Switzerland's parliament is moving closer to softening capital rules for UBS after a compromise on its capital requirements gained traction in committee deliberations. The compromise would lower Common Equity Tier 1 (CET1) capital requirements for foreign subsidiaries to between 70-80%, down from the original plan of 100%. This would significantly reduce the additional capital burden on UBS, which was estimated at around $20 billion under the original framework.

The revised proposal would also allow UBS to use Additional Tier 1 (AT1) instruments, such as bonds that convert to equity or get written down if a bank hits trouble. Under this compromise, AT1 bonds could cover up to 50% of the capital requirement, potentially reducing the new CET1 capital needed by UBS to as little as $400 million.

The upper house's Economic Affairs and Taxation Committee is scheduled to meet on August 10-11 and 31, with a decision expected on August 31. If approved, the revised proposal would move to the full Council of States for consideration in September, with final passage targeted by the end of 2026.