UBS wins interim backing for AT1 capital compromise

UBS won interim support from a key Swiss parliamentary committee for using convertible debt, known as AT1s, to meet up to half of a proposed extra capital requirement.

The measure would help UBS meet a requirement designed to ensure its foreign businesses cannot endanger the domestic bank. Switzerland has been pursuing a capital increase of about $20 billion since Credit Suisse collapsed more than three years ago.

The committee voted 10-2, with one abstention, to allow AT1 debt for as much as 50% of the requirement if the instruments are reformed. The approach would be cheaper for UBS than funding the full amount with equity.

The proposal remains subject to a lengthy legislative process and could be changed by the lower house. The upper chamber is scheduled to vote during its autumn session from Sept. 14 to Oct. 2.

Under the plan, UBS would face restrictions if it fell below its minimum common-equity threshold, including bans on dividends, share buybacks, and AT1 coupon payments, along with a reduced bonus pool.