Latest news with #AT1bonds
Reuters
2 days ago
- Business
- Reuters
UBS faces tough new Swiss banking sector rules
BERN, June 6 (Reuters) - The Swiss government on Friday proposed stricter rules for UBS (UBSG.S), opens new tab following its takeover of Credit Suisse, which could make it hold $26 billion more in core capital, confirming some of the bank's worst fears about incoming new regulations. The key proposal, which the bank would have six to eight years to prepare for after it became law, is that UBS must fully capitalise its foreign units, confirming what many analysts, lawmakers and executives had been expecting. The government said its capital requirement proposal would allow UBS to reduce its holding of Additional Tier 1 (AT1) bonds by $8 billion. Today, UBS must only 60% capitalise its foreign units and can cover some of the capital with AT1 debt. UBS executives say the additional capital burden will put the Zurich-based bank at a disadvantage to rivals and undermine the competitiveness of Switzerland as a financial centre. Shares in the bank rose after the government unveiled the proposals on Friday afternoon, climbing by more than 6%. Such was the shock in Switzerland over the 2023 collapse of Credit Suisse that top politicians led by Finance Minister Karin Keller-Sutter vowed to introduce more robust rules that would protect taxpayers and prevent another meltdown in future. Keller-Sutter now holds Switzerland's rotating one-year presidency and Friday's announcement will start a long period of political wrangling over the measures, which the governing federal council called "targeted and proportionate." "They strengthen trust in the financial centre, which, in the view of the federal council, is central to its stability and competitiveness," the council said in a statement. A parliamentary inquiry last year noted that since UBS bought Credit Suisse for 3 billion Swiss francs ($3.65 billion) in March 2023, it has had a balance sheet bigger than the Swiss economy, and urged the government to take the foreign units into account. The federal council said it would present drafts on the proposals for consultations with stakeholders in the second half of 2025. Finance Ministry officials say laws requiring parliamentary approval will not enter force before 2028. Separate measures known as ordinances that can be issued directly by the government could apply from the start of 2027. A six to eight-year transition period looked appropriate for UBS to meet new rules on capitalising foreign units from when they come into force, the government said. That could give the bank until the mid-2030s to comply. UBS's shares have lagged European peers in anticipation of the tougher rules and sources inside the bank have warned the new regulations could make it an appealing takeover target. Under the Swiss proposals, UBS's Common Equity Tier 1 (CET1) capital ratio could end up somewhat higher than those of global rivals, the government said. UBS's CET1 ratio of 14.3% could rise up to 17%, above rivals like JPMorgan (JPM.N), opens new tab at 15.8%, Morgan Stanley (MS.N), opens new tab at 15.7%, and 15.3% at Goldman Sachs, it said. Shares in UBS rose more than 60% in the 12 months following its acquisition of Credit Suisse. But the stock has since sharply underperformed; UBS shares have lost about 5% in the past year, while a top European banking index (.SX7P), opens new tab climbed 37%. Analysts say the new regulations could trigger a rejig of UBS's business model, which now focuses on growth in the United States and Asia. To take the edge off the rules, the bank may be tempted to sell some assets, banking experts say. The Swiss government also set out piecemeal reforms to bolster the market regulator FINMA, which was heavily criticised for its response to the Credit Suisse collapse. These include measures aimed at holding bankers to account, giving the regulator the power to impose fines and making it easier to restrain pay and claw back bonuses. Still, the proposals come years after the European Union introduced similar measures in the wake of the 2007-2009 financial crisis. The government also proposed making it easier for banks to access liquidity from the Swiss National Bank. Barriers to transferring collateral to the SNB will also be removed. ($1 = 0.8222 Swiss francs)
Bloomberg
4 days ago
- Business
- Bloomberg
Saudi Banks Are on Risky Debt Spree to Keep Funding Gigaprojects
Saudi Arabia's banks are rushing to issue risky debt as the kingdom grapples with the mammoth spending demands of building a futuristic new city and hosting global sporting events. Lenders including Al Rajhi Bank and Banque Saudi Fransi have sold more than $5.6 billion in Additional Tier 1 bonds so far this year — already reaching an annual record for the country. That's made Saudi Arabia the second-biggest source of AT1 supply in major currencies globally in 2025, based on data compiled by Bloomberg.
Reuters
6 days ago
- Business
- Reuters
Law firm challenges Swiss court over delay in Credit Suisse AT1 write-down case, filing shows
LONDON, June 2 (Reuters) - A Zurich-based law firm has filed a complaint with the Swiss Federal Supreme Court challenging a tribunal's delay in addressing investors' claim on the write-down of Credit Suisse bonds, a legal filing seen by Reuters shows. Hundreds of bondholders in April 2023 sued market regulator FINMA at the Swiss administrative court in St. Gallen to recoup losses on 16 billion Swiss francs ($19.4 billion) of AT1 bonds that were written down when UBS (UBSG.S), opens new tab rescued Credit Suisse. There has been no significant activity by the Federal Administrative Court since spring 2024, the filing, submitted in German, shows. A spokesperson for the Federal Supreme Court confirmed that the court had received the complaint. The complaint was filed by Zurich-based law firm grosz I poledna, acting for Pallas, the law firm representing the investors, around mid-May, according to a person familiar with the proceedings. Pallas represents about 800 clients who at the time of the write-down held around $2 billion of Credit Suisse AT1 bonds, a representative for the law firm told Reuters. Pallas declined to comment for the story. A representative for Switzerland's Federal Administrative court in St. Gallen said: "The proceedings are particularly challenging due to their scope, the high number of parties and the complexity of the legal issues involved, and entail many procedural steps. This is a multi-party procedure, whereby it must also be ensured that all complainants or their legal representatives are granted the right to be heard. We treat the proceedings as a priority." A spokesperson for FINMA declined to comment. While questions of an administrative nature were clarified between the second half of 2023 and spring 2024, according to the filing, there have been no "discernible activities" by the Federal Administrative Court, the filing shows. "While this case is unprecedented for the Swiss courts as there have never been so many appellants challenging one FINMA order, by now it should have progressed as appellants have a right to have their case looked at expeditiously," said Jonas Hertner, a Zurich-based lawyer who had previously represented Credit Suisse AT1 clients at law firm Quinn Emanuel. The Swiss Federal Supreme Court is the head of the Swiss judiciary system and appellants can file complaints to pressure the administrative court to act. There is no deadline by which the Supreme Court is required to respond, but complaints of this kind could take a few months, according to lawyers. In October 2023, Reuters reported that the St. Gallen administrative tribunal was weighing whether to grant Credit Suisse investors access to more documents. Back then, some investors had hoped to gain access to filings in a matter of weeks. The documents, including the responses to the appeal by Credit Suisse and FINMA, have not yet been made public, according to the complaint. The write-down shocked markets and upended a long-established practice of granting bondholders' priority over shareholders in a debt recovery. The market has since recovered with UBS tapping the AT1 market after the Credit Suisse rescue. ($1 = 0.8241 Swiss francs)
