UBS and Credit Suisse poised for tighter regulation
Swiss regulator out with proposals for tighter regulation of global banks
From January 1, 2013, the two banks will have to hold increased capital buffers above the Basel II minimum requirements - they will need to meet a minimum ratio (capital as a percentage of risk-weighted assets) of 12%, which could rise to 16% in good times - defined as a period of two years of profits at the average level.
UBS and Credit Suisse will also have to hold capital as a percentage of (unweighted) assets of at least 3% at group level and 4% at bank level - higher in good times. This leverage ratio excludes domestic lending (except interbank) and selected assets used in central bank repos.
Finma has also published proposals for rules on bankers' pay, which are now out for comment. Under the proposal, all Swiss banks would have to ensure high risk incurred by employees results in lower variable remuneration than low risk. Bonuses should also only be paid when the group is profitable and all award criteria should be long-term oriented.
The regulators have also issued new guidelines for liquidity requirements and stress testing. In common with the EU and the US, the SNB is pushing for an international framework to allow a co-ordinated unwinding of a failed bank to address the 'too big to fail' problem of systemically relevant institutions. Another option being looked at is limiting the size of banks either by defining direct limits or by setting indirect incentives such as higher capital requirements to keep the size down.
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