In a bid to meet regulatory requirements that aim for easy resolution at times of crisis, UBS AG (UBS) has launched a share-for-share exchange offer for setting up a group holding company – UBS Group AG. The offering will allow the shareholders to exchange their existing shares with the shares of the new holding company on a one-for-one basis.
Post transaction, UBS Group AG, which is currently a subsidiary of UBS AG, will emerge as the holding company for UBS AG and its subsidiaries. Shares of UBS Group AG will be listed on the SIX Swiss Exchange (SIX) and the New York Stock Exchange (NYSE) while the company proposes to delist UBS AG shares, conforming to the listing rules. UBS expects to propose a supplementary capital return of at least CHF 0.25 per share to shareholders of UBS Group AG.
UBS in its releases said “the establishment of a holding company is a significant step in a series of envisaged changes to UBS’s legal structure that are intended to substantially improve its resolvability in response to evolving industry-wide “too-big-to-fail” requirements.” Owing to its restructuring step, the company expects that it will be eligible for a capital rebate per the Swiss "too-big-to-fail" regime. This is expected to reduce the overall capital requirements for the Group.
Notably, in May, the Swiss Financial Market Supervisory Authority FINMA set tough capital requirements for UBS to safeguard the company from any further financial downturn. The minimum capital requirement as a percentage of risk-weighted assets (RWAs) is set at 19.2%, to be achieved by 2019.
Apart from establishing the holding company, UBS plans to set up a Swiss banking subsidiary by mid-2015 and a US Intermediate Holding Company by mid-2016.
UBS Heading Towards Forex Rigging Probe Settlement
In the wake of heightened investigations regarding manipulation of the currency market, UBS set the alarm bells ringing that it may face “material” penalty charges. The Swiss banking giant is in talks with regulators to settle claims of its alleged involvement in foreign exchange rates rigging.
While UBS did not reveal any regulator’s identity, it mentioned in the prospectus for the share offering “The terms proposed include findings that UBS failed to have adequate controls in relation to its foreign exchange business that were adequate to prevent misconduct, and would involve material monetary penalties.” The bank also mentioned that other regulators may initiate settlement talks “in the near future.”
Recently it came into light that the U.K. regulators held talks with six global banks in order to reach a settlement on a long-standing probe regarding the suspected rigging of the currency market. The Financial Conduct Authority (FCA) – the British independent financial regulator – was involved in preliminary settlement talks with representatives from six banks including UBS, The Royal Bank of Scotland Group plc (RBS), JPMorgan Chase & Co. (JPM) , Barclays PLC (BCS) and Citigroup Inc. (Read more : U.K. Regulators in Talks with 6 Banks for Currency Rigging)
Earlier in Dec 2012, UBS reached a $1.5 billion settlement with U.K. and Swiss authorities to resolve charges against the bank for its involvement in the manipulation of the London Interbank Offered Rate (LIBOR).
While any potential settlement may weigh on UBS’ financials, however, we believe these are set to relieve the company from much of its legacy issues.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment