UBS faces 'substantial' capital requirement rules post Credit Suisse collapse
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The news: The Swiss government announced its plans to close-gaps in its ‘too-big-to-fail regulation,’ after the Credit Suisse crisis ignited concerns that the country’s systemically important banks need safeguarding.
The numbers: The 2023 takeover of Credit Suisse for USD3.25 billion ($5 billion), saw UBS’ balance sheet swell to USD1.7 trillion, which is double the size of Switzerland's annual economic output.
The context: The Swiss government proposed a package of 22 measures for direct implementation, to strengthen and develop the country’s too-big-to-fail regime. The report says that the quantitative and qualitative capital requirements for systemically important banks should be tightened in a targeted way and supplemented with a forward-looking component.
In an FAQ document on the proposal, the government states that the increase in the capital requirements for UBS will be substantial, “especially if UBS were to retain its current size and structure, or even grow."
While giving FINMA the power to impose penalties had been supported by Swiss Finance Minister Karin Keller-Suttor as well as other players, the proposal says that the introduction of any such powers is being examined.
The package will be submitted for discussion in the Swiss Parliament.
Chair of the US FDIC, Martin Gruenberg, also told the Financial Times on Wednesday that the way the Swiss government handled the Credit Suisse collapse was unhelpful, and that US regulators would not shy away from shutting down a bank should a similar situation arise. Gruenberg said that shareholders, creditors and executives cannot rely on government bailouts similar to those that stabilised the financial system post-2008, and: “The fact that Swiss authorities did not put Credit Suisse into resolution […] was frankly unhelpful and ultimately a missed opportunity.”
The sources: Swiss Government press release, Swiss Government report, Financial Times
