ZURICH (Reuters) - The Swiss government said on Wednesday it would lay out tougher capital requirements for UBS UBSG.VX and Credit Suisse CSGN.VX by the year-end, which are designed to protect the banks against future crises.
Switzerland has been at the forefront of efforts by policymakers and regulators to ensure banks do not become so big and interconnected with the international financial system that they would need rescuing with taxpayer cash if they run into trouble.
Solving this “too big to fail” problem has been a priority for regulators in the United States and Europe after several banks, including Zurich-based UBS, were bailed out in the 2007-09 financial crisis.
“Additional measures and adjustments are required to boost the resilience of systemically important banks further and to make their restructuring or orderly resolution possible without taxpayers incurring any costs,” the Swiss government said in a statement.
The plans are part of a review of Switzerland’s existing rules on how much capital banks deemed too big to fail have to hold. These have been in place since 2012.
UBS and Credit Suisse welcomed the measures, but both said Switzerland should not press ahead with its plans before international regulators make their own requirements. They also said the government should make sure the proposed rules did not cause any damage to the Swiss financial sector.
“The individual ... measures that will now be defined need to be aligned with international developments in terms of both content and timing,” Credit Suisse said.
UBS also said any Swiss proposals should be comparable with international standards. “A proper evaluation and disclosure of the potential negative consequences for the (Swiss) financial center and the broader (Swiss) economy is necessary,” UBS said.
Last week, UBS Chief Executive Sergio Ermotti said he expected Switzerland to hold off on formal proposals for leverage ratios until international regulators have weighed in, which is expected later this year or in 2016.
The government’s comments are in response to recommendations in December from a panel of experts which proposed that UBS and Credit Suisse should be subject to a higher leverage ratio, the broadest of capital requirements, but stopped short of laying out specifics for Switzerland’s two largest banks. The leverage ratio is a measure of a bank’s capital to its total assets.
The amendments to Switzerland’s existing legislation, to be prepared in consultation with the Swiss regulator, Switzerland’s central bank, and the banks themselves, should be submitted by year-end, the government said.
Reporting by Katharina Bart. Editing by Jane Merriman