Sept. 1 (Reuters) - UBS Group AG (UBSG.S):
- Acknowledges efforts of the Economic Affairs and Taxation Committee of Council of States (WAK-S)
- Says the committee has taken important facts and context into account to inform its recommendations
- Says this includes aligning additional tier 1 (AT1) instruments more closely with international practice, which enhances their loss-absorbing capacity early on in a crisis
- Supports targeted adjustments to Swiss banking regulation that are internationally aligned, proportionate and address root causes of the Credit Suisse crisis
- However, WAK-S recommendations would lead to a significant increase in costs for UBS
- Recommendations would further increase financing costs for the Swiss financial center and economy in an international environment in which other major financial centers are simplifying and streamlining their regulatory frameworks for banks
- Recommendations outlined by WAK-S would require UBS's parent bank (UBS AG) to fully underpin its investments in foreign subsidiaries, with 50% CET1 capital and up to 50% AT1 capital, up from 45% CET1 capital and 15% AT1 backing under current law
- Says this would represent a substantial tightening of Swiss capital requirements, which are already among the most stringent in the world
- Says it would be required to hold around $30 billion of incremental tier 1 capital since the acquisition of Credit Suisse
- Ordinance-level changes announced earlier this year are expected to eliminate $4 billion of CET1 capital at the group consolidated level
- UBS estimates that WAK-S recommendations would require it to hold incremental tier 1 capital of around $13 billion at UBS AG that could be met with AT1
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