Lawmakers on the upper chamber's Economic Affairs and Taxation Committee said UBS Group AG should be permitted to apply additional tier-1 convertible bonds toward up to half of the extra capital the government is seeking - so long as those securities are overhauled. Because borrowing typically costs less than issuing common equity, their endorsement, if enacted, would blunt the hit from higher requirements. The tally was 10 in favor, two against, and one abstention.
The Zurich-based lender scored a provisional win in its yearslong dispute over Switzerland's push to pile on billions more in loss-absorbing resources. The centerpiece of the reform would lift capital by around $20 billion, aiming to prevent overseas operations from jeopardizing the domestic entity. UBS has warned the plan would hurt its competitiveness and has quietly supported an AT1 pathway as a compromise.
AT1 securities emerged after the global financial crisis to bolster banks' ability to absorb losses. Lawmakers threw their weight behind changes so the instruments would activate earlier during periods of stress - addressing shortcomings that surfaced during Credit Suisse's unraveling. The Finance Ministry has criticized AT1s as an unreliable backstop in a crisis, but the committee said UBS should still cover the full value of its foreign subsidiaries using a mix of equity and AT1s, aligning with the government's initial target.
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UBS ranks among the largest AT1 issuers globally; within Europe's market valued at $286 billion, its outstanding instruments constitute about 7%. The Swiss Bankers Association - an industry lobbying body - said it welcomed the proposed AT1 reforms but opposed tougher capital rules. Debt holders generally accept lower returns than shareholders, and leaning less on equity can lift profitability metrics and influence bonuses. UBS did not immediately comment.
Politically, the committee's view is just one waypoint in a long path. Members of the lower chamber, which leans further to the left, could roll back parts of these concessions. The Social Democrats, parliament's second-largest party, released a statement on Monday that criticized the committee's stance. Committee President Erich Ettlin said the outcome would "serve Switzerland," and "is no victory for UBS."
The endorsement now goes to the upper house's floor, with a vote slated for the chamber's autumn session running from Sept. 14 to Oct. 2. Even if it passes, the broader legislative process is expected to continue at least into next year.
