Swiss authorities needs to tighten banking laws | EUROtoday

Gut a yr after the emergency takeover of Credit Suisse by rival UBS, the Swiss authorities is attempting to tighten regulation and supervision of the most important banks. The intention is to forestall UBS from entering into hassle – because it did through the 2008 monetary disaster – and having to be rescued by the state.

“There is a need for higher capital resources, an improved liquidity supply and measures against management failures and bonus excesses,” stated Swiss Finance Minister Karin Keller-Sutter on Wednesday afternoon at a press convention at which the FDP politician introduced the eagerly awaited “Report on Banking Stability”. has. The authorities's major purpose is to guard taxpayers and the financial system. “What happened at Credit Suisse must not be allowed to happen again. We must prevent a bank crisis from becoming a threat to the Swiss economy,” stated Keller-Sutter.

Total belongings are twice as massive as GDP

This worry isn’t any coincidence: the takeover of Credit Suisse, which was achieved with the assistance of emergency legislation, federal ensures and big liquidity help from the Swiss National Bank, has made UBS a significant threat for Switzerland. The new large financial institution's complete belongings are nearly twice as massive because the nation's gross home product. In the occasion of an impending collapse, no different Swiss financial institution would be capable to step in as a rescuer.

The collapse of a significant systemically essential financial institution can shake the worldwide monetary system. Rules have due to this fact been put in place to make sure that banks which might be too large to fail (TBTF) will be wound up in an orderly method and never on the expense of taxpayers. There was additionally a ready-made decision plan for Credit Suisse, however they didn't dare put it into apply. The worry of execution and contagion dangers was too nice.

22 measures proposed

In the virtually 340-page report, the federal government involves the conclusion that lots of the measures which have already been launched nationally and internationally to extend monetary market stability have essentially confirmed themselves. However, the evaluation additionally exhibits gaps within the current system and due to this fact a necessity for motion. In order to strengthen and additional develop TBTF regulation, the federal government is proposing 22 measures to be carried out straight, with Parliament nonetheless having a say. The first selections will not be anticipated till subsequent yr, in order that the outcomes of the Parliamentary Commission of Inquiry, which is presently analyzing the Credit Suisse case, will also be included. Their report needs to be prepared on the finish of 2024.

Specifically, the capital necessities for systemically essential banks are to be strengthened “in a risk-oriented and targeted manner”. On the one hand, behind this formulation lies the prevailing requirement that enormous banks should enhance their fairness capital the bigger they’re. In the case of UBS, this implies a capital enhance of 10 p.c unfold over a number of years. On the opposite hand, banks ought to in future maintain extra capital for subsidiaries overseas. However, the federal government is refraining from a normal enhance within the minimal capital ratios, which was demanded by plenty of economists and apparently additionally desired by the Swiss central financial institution. For aggressive causes, such a rise would have affected not solely UBS, however all main systemically essential banks (together with Zürcher Kantonalbank, Raiffeisen and Postfinance), argued Keller-Sutter.