UBS is buying back around Sfr16bn (Eu14.8bn) of debt issued by UBS AG in a public tender offer announced today (Friday), including a US dollar covered bond, as the Swiss group deals with the introduction of tighter regulatory requirements such as total loss-absorbing capacity (TLAC).

The only covered bond included is a $2bn (Eu1.87bn, Sfr2.01bn) 2.25% March 2017 Reg S/144A issue launched in March 2012. The group is making cash tender offers to purchase 17 issues across senior debt, subordinated debt and covered bonds, with the tender offer period scheduled to end on 15 December.

“This transaction is consistent with our proactive approach to optimizing the Group’s interest expense, while maintaining our strong liquidity, funding and capital position,” the group said.

At the time of announcing its third quarter results on 3 November, the group, in a discussion of how it will meet TLAC requirements, highlighted Sfr33bn of UBS AG senior unsecured and covered bonds that it said it expected to replace upon maturity with issuance of TLAC bonds from holding company UBS Group AG over the next four years.

The new Swiss framework for Credit Suisse and UBS was finalised in late October, making it, according to Moody’s, the first country in the world to introduce binding TLAC rules, with a leverage of 5% also introduced.

“As a result of the proposed loss-absorbing gone-concern capital requirements, we expect Credit Suisse and UBS to issue more TLAC-eligible senior debt from their respective group holding companies,” said the rating agency.

According to UBS, the subordinated bonds subject to the offers are currently eligible as Tier 2 capital with a remaining capital content under Basel III phase-in rules, but will not be eligible for Tier 2 capital treatment on a fully-applied basis beginning in 2019.