Bern, Switzerland – Swiss Finance Minister Karin Keller-Rutter has rejected a proposed compromise regarding AT1 bonds for UBS Group AG, effectively halting progress in the ongoing debate over new capital requirements for the banking giant. The announcement dashes hopes that the government's position on the contentious issue might be shifting.

The AT1 bonds, or Additional Tier 1 bonds, lost significant value earlier this year when Swiss authorities intervened to orchestrate the takeover of Credit Suisse by UBS. Lawmakers have since been exploring potential solutions to address the losses incurred by AT1 bondholders, a move designed to restore investor confidence and clarify regulations surrounding these complex financial instruments.

Keller-Rutter's opposition stems from concerns that any compromise could undermine the stability of the Swiss financial system and set a precedent that could discourage future investment. While details of the proposed compromise remain somewhat unclear, it reportedly involved exploring options to partially compensate AT1 bondholders, despite the government's prior commitment to protect creditors of Credit Suisse.

The debate over UBS’s capital requirements and the fate of AT1 bonds has been a significant point of contention in Switzerland. The government’s initial decision to shield creditors during the Credit Suisse rescue sparked criticism and raised questions about the fairness and predictability of Swiss financial regulations. Lawmakers are now grappling with how to balance the need to protect investors with the broader goal of maintaining financial stability.

UBS, Switzerland's largest bank, is currently absorbing Credit Suisse following the emergency takeover. The integration process is expected to be complex and lengthy, and the capital requirements debate adds another layer of uncertainty to the situation. Keller-Rutter’s firm stance suggests that the government intends to maintain a strict approach to financial regulation, even in the face of pressure from lawmakers and investors. The discussions surrounding UBS and its capital structure are ongoing, and further developments are expected in the coming weeks.