Big Swiss banks must comply with new regulations
(15 October 2015 – Switzerland) Switzerland’s biggest banks will be required to comply with regulatory rules modelled on those in the U.S. after the country’s finance ministry rejected UBS Group’s and Credit Suisse Group’s pleas for softer terms.
Lenders will be required to hold capital equal to about 5 percent of total assets, in line with the U.S. leverage ratio for its “too-big-to-fail” banks and above the 3 percent minimum set in a global agreement by the Basel Committee on Banking Supervision.
The Swiss government will also align its calculation of the ratio with the method employed in the U.S., resulting in fewer types of debt counting toward capital, one of the people said.
Following the 2008 crisis, the leverage ratio has increased in importance as a measure of financial stability. Noth Swiss based banks had argued that the domestic financial system isn’t comparable with the U.S., as lenders have access to larger pool of capital markets. In order to comply with the regulations, UBS and Credit Suisse will need to add billions of equity or contract their activities.
Both banks’ shares fell following the announcement. UBS shares dropped as much as 3.5 percent in Zurich trading yesterday. Credit Suisse declined as much as 3.9 percent.
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