"The strictest ever" capital rules now have a compromise window. UBS Group AG (UBS.US) stock price soared to its highest level since 2008.

Swiss lawmakers have proposed a compromise on new capital rules for UBS Group AG in an effort to ensure its international competitiveness. This has pushed the stock to its highest level since 2008, with pre-market trading up over 1.5% at $43.3. The Swiss government had previously proposed that UBS Group AG, which became Switzerland's sole global bank after acquiring struggling Swiss Credit in 2023, should increase the capital adequacy of its foreign subsidiaries to 100%, up from the current 60%, to cover potential overseas losses. After media reports of a compromise proposal from a group of lawmakers, UBS Group AG's stock price rose. Since acquiring Swiss Credit, the bank's stock price has now doubled. UBS Group AG's balance sheet is roughly twice the size of Switzerland's annual economic output, making the government determined to avoid a repeat of the Swiss Credit collapse. The government's proposal is a key part of the reform, with UBS Group AG stating that it would require finding an additional $240 billion in capital. The government had suggested UBS Group AG use Common Equity Tier 1 (CET1) to meet this requirement. However, the lawmaker group proposed allowing UBS Group AG to use Additional Tier 1 (AT1) debt to cover up to 50% of its foreign subsidiary capitalization requirement, easing the burden on the bank. One of the proposers, former leader of the Free Democratic Party (FDP) Thierry Buhl-Carter's Incorporated, said that behind the scenes, lawmakers from the right-wing Swiss People's Party, center-right Free Party, centrist Centre Party, and center-left Greens Free Party were driving the proposal. The proposal supports setting the strictest capital rules globally for UBS Group AG. The document stated, "However, the gap between regulatory requirements in the EU, UK, US, and major financial centers in Asia cannot be so large as to affect competitiveness," urging a balanced solution. The plan also suggests limiting investment banking activities to within 30% of the bank's balance sheet's risk-weighted assets. UBS Group AG stated that the proposal is "more constructive than the government's extreme measures," but noted that Switzerland already has the strictest capital rules in the world. It called for regulations to be "proportionate and in line with international standards." The Finance Ministry stated that the government has submitted its proposal and will decide on next steps in due course. Last week, media reports suggested the government was preparing to soften some of the new regulations.