Swiss panel backs UBS AT1 capital compromise

A key committee in the upper house of the Swiss parliament has endorsed a compromise on new capital requirements for UBS Group AG. The Economic Affairs and Taxation Committee recommended that UBS be allowed to satisfy half of a newly proposed capital requirement using Additional Tier 1 (AT1) convertible debt instead of relying solely on the highest‑quality common equity.

This recommendation affects how much of the new loss‑absorbing capital must be raised as equity versus AT1 instruments. By permitting 50% of the new requirement to be met with AT1 debt, the proposal would adjust the mix of capital that UBS needs to hold, while keeping the overall objective of stronger resilience in place.

AT1 securities are a form of bank capital designed to absorb losses, typically sitting between senior debt and common equity in the capital structure. Allowing these instruments to count for half of the new capital requirement would give UBS more flexibility in how it funds the additional buffer.

Under the committee’s approach, the highest‑quality equity capital would still cover at least half of the new requirement, while the remaining portion could be provided through convertible AT1 debt. This framework aims to maintain loss‑absorbing capacity while diversifying the capital instruments UBS can use to meet regulatory demands.

The committee decision represents an interim stage in the Swiss legislative process. The recommendation must still progress through further parliamentary deliberations before any change to UBS’s capital rules is finalized.

Until the full parliament adopts specific legislation, the compromise remains a proposal rather than a binding requirement. The committee’s backing, however, signals a direction for upcoming debates on how to calibrate UBS’s capital structure and the permitted share of AT1 debt in meeting new regulatory demands.

The move by the upper‑house committee shapes the ongoing policy discussion over how best to strengthen UBS’s capital position. It reflects an attempt to balance higher resilience with flexibility in the choice of capital instruments.

By opening the door for AT1 debt to cover half of the new requirement, lawmakers are considering a capital framework that combines substantial equity with additional loss‑absorbing instruments. The final outcome will depend on subsequent parliamentary decisions that determine whether this compromise becomes law and how it will be implemented in practice.