UBS and Credit Suisse will be forced to meet
tough new capital recommendations as part of the Swiss government’s
crackdown on Swiss banks deemed “too big to fail”.
The country’s two top banks will have to hold
19% of risk-weighted assets, 10% of which must be in the form of
common equity, or capital of the highest
quality.
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This is 3 percentage points higher than the 7%
capital buffer proposed by the Basel III capital requirements last
month.
The Commission of Experts, appointed by the
Swiss Federal Council in November 2009, have submitted the
unanimously agreed recommendations in an attempt to limit the risk
posed by banks that are systemically important to the Swiss
economy.
It means UBS and Credit Suisse will have to
accumulate CHF75bn ($77.1bn) each to meet the
standards.
“These requirements are substantially more
rigorous than the current requirements and the minimum standards of
Basel III,” the report said.
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By GlobalDataCredit Suisse said its capital-efficient
strategy will allow it to meet the “very stringent” measures by
2019.
The bank said it has been preparing for
regulatory changes for past two years and revealed it would have
CHF400bn of risk-weighted assets by the end of the
year.
UBS did not disclose its predicted
risk-weighted assets but said it is “well positioned to fulfill the
new requirements… well before the proposed effective date of
2018.”
In addition to the 10% threshold, the new
proposals require a further two tiers of capital including a buffer
with a ceiling of 3% of risk weighted assets.
There will also be a “progressive component”
that rises with a bank’s systemic importance and is designed as an
incentive for banks to limit the danger of becoming “too big to
fail.”
The recommendations have been submitted as
draft law and could be enacted by early next year.
