UBS: no need for provision on Credit Suisse AT1 bonds

ZURICH, Oct 29 (Reuters) - UBS UBSG.S said on Wednesday it does not need to book a provision related to the 16.5 billion Swiss francs ($20.8 billion) in Credit Suisse AT1 bonds that were written off before the bank acquired its former rival in 2023.

The bank made the statement after a court ruled earlier this month that a decision by FINMA, the Swiss financial market regulator, to order the write-off of the AT1 bonds was unlawful, throwing into question who might become liable for the debt.

"In our view, there should be no liability in this matter," UBS said in a statement issued with its financial results. "As a consequence, there is no need to record a provision."

FINMA later said it would appeal the decision; UBS also plans on challenging the ruling. The bank said the appeals process generally takes about a year, adding that any subsequent proceedings could take several years.

UBS said it would not speculate on what would happen if Switzerland's Supreme Court upheld the ruling from the Federal Administrative Court earlier this month.

AT1 bonds, introduced after the 2008 financial crisis, are hybrid debt instruments that banks issue to bolster their capital buffers and absorb losses in times of stress.

UBS is currently facing stricter capital requirements under government proposals that seek to ensure that a Credit Suisse-like meltdown never happens again.

The bank said it supports steps to further strengthen AT1 instruments as a recovery tool, provided reforms are consistent with international practices.

($1 = 0.7931 Swiss francs)