Switzerland’s two big banks, UBS and Credit Suisse, will be asked to hold more capital in reserve than international competitors in order to offer extra insurance against a catastrophic failure, according to proposed rules by a Swiss government panel.
The rules address concerns by the Swiss National Bank and others that a severe crisis at Credit Suisse or UBS could prove more than the country can bear.
From NYTimes.com:
Switzerland’s decision to hold its big international banks to a higher standard could alarm some in the industry, who have expressed fear that countries will use the so-called Basel III proposals merely as a starting point to impose onerous new requirements on banks.
With its banking tradition and reputation for prudence, Switzerland could also serve as an influential precedent for other governments which are rewriting their banking rules. However, analysts said that the proposed Swiss rules are not as strict as some in banking circles had feared.
“These are at the better end of expectations and hence should be a positive catalyst for the shares,” Jon Peace, a banking analyst at Nomura Global Equity Research, said in a note Monday.
“The proposed measures will strengthen the stability of the financial system,” Credit Suisse, based in Zurich, said in a statement. “They also represent an appropriate solution to the ‘too big to fail’ problem relating to the big banks without compromising their international competitiveness or that of the Swiss financial center.”
It is worthwhile to note here that the combined balance sheets of the two banks are five times the size of the Swiss economy.
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