Swiss banks faces possible tightening measures

12:55, October 05, 2010      

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A commission of Experts appointed by the Swiss government proposed a package of measures on Monday aiming at preventing the finical institutions from "too big to fail."

The proposal, an initiative by the Swiss government, the Federal Council, is mainly directed towards the Swiss banking giants -- Credit Suisse and UBS, to ensure no more bailouts as happened during the Financial Crisis.

If the new requirements are passed, the two financial institutions will be facing capital and other requirements far beyond the current ones that took effect in autumn 2008, and the newly endorsed Basel III.

The proposal, unanimously agreed by the commission, involves four core measures on capital, organization, liquidity and risk diversification.

For the capital requirements, the commission suggested a three- staged capital components: a minimum requirement, a buffer, and a progressive component which could be raised progressively with the systemic importance of the bank.

As a result, the overall capital requirements for Credit Suisse and UBS will possibly amount to some 19 percent of risk-weighted assets comparing with 10.5 percent set by Basel III.

The Commission of Experts said the overall requirements could amount to some CHF 75 billion for each of the two banks, based on their current balance sheet values, market shares and risk exposure levels.

The Commission of Experts was established in November 2009 with a review to access the economic risks posed by large companies and explore potential solutions to contain the "too big to fail" problem. The Commission is headed by Peter Siegenthaler, former Director of the Federal Finance Administration, and its members includes authorities, academia and professionals from private sector.

Source: Xinhua


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