JPMorgan Sees UBS Compromise Cutting CET1 Need to $400 Million

UBS Group AG’s need for the highest-quality form of capital would drop to around $400 million if a compromise proposal on controversial regulatory reforms put forward by Swiss lawmakers last week was adopted, according to estimates from JPMorgan Chase & Co analysts.

The group of legislators proposed that UBS can use AT1 bonds — a type of junior debt — instead of more expensive common equity tier 1 capital for 50% of the funds it will need to give full backing to its foreign units at the level of the parent bank. The Swiss government’s proposal currently says it can only use equity capital, which can absorb losses more readily.