UBS overhauls structure to meet 'too big to fail' rules

29th September 2014, Comments 0 comments

Swiss banking giant UBS said Monday it was proceeding with plans to overhaul its legal structure as it adapts to rules on institutions considered "too big to fail".

The bank said in a statement it would begin its makeover next month, when it will launch a share-for-share exchange offer allowing it to become a holding company.

The move is aimed at making it easier to separate any divisions that might run into difficulties and shield the rest.

It is meant to help UBS avoid a repetition of the 2008 crisis, when Switzerland had to step in and save the bank from tanking and dragging the entire economy down with it.

The new structure should bring the bank in-line with Swiss rules established after the crisis to ensure banks do not become "too big to fail", potentially allowing it to cut back how much capital it must hold to cover possible losses.

Shareholders in the new holding company UBS Group AG will carry the same voting rights as they had before the shift, the bank said, stressing that its board "unanimously recommends acceptance of the offer".

The exchange offer programme is set to begin on October 14 and to expire on December 1. Trading in the new shares will replace the old ones on the New York Stock Exchange starting on November 19.

Once the transaction is complete, shareholders can expect an additional capital return of at least 0.25 Swiss francs ($.026, 0.21 euros) on each share, UBS said.

The bank also released fresh financial data, showing its earnings rose to 27.05 billion Swiss francs ($28.45 billion, 22.42 billion euros) at the end of August, from 26.32 billion at the end of June.

Equity attributable to shareholders inched up to 50.8 billions Swiss francs from 49.5 billion at the end of the second quarter.

UBS's shares gained 0.18 percent to close at 16.73 euros, while the Swiss stock exchange's main SMI index inched up 0.03 percent.

© 2014 AFP

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