The strengthening of its balance sheet has had an unpleasant side-effect for UBS in Switzerland. The problem may be overcome as the bank has already created an issuer for capital instruments.

In future, Switzerland's largest bank will use the UBS Group Funding subsidiary rather than the UBS Group structure to issue capital instruments, the bank reported on Monday.

The instruments will be used to comply with the «too-big-to-fail» requirements designed to bolster its capital base by 2019.

Burdens for Capital Creation

The substitution can be seen as a sort of transitional solution until the easing of taxation on the capital creative instruments kick in at group level, as decided by the government at the start of the year.

Banks deemed relevant to sustain the financial market will face tax burdens when strengthening capital, which should minimize their resistance to crises. This has been agreed by the government, allowing the banks hundreds of millions of francs in relief.

When the relief kicks in, the bank will revert to the direct issue of capital creating instrument by the UBS Group.