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Swiss propose tougher capital rules for big banks
[ZURICH] The Swiss government proposed on Friday tightening capital requirements for big banks that could prompt UBS and Credit Suisse to issue up to a combined 24 billion Swiss francs (S$32.4 billion) worth of bail-in bonds.
The draft proposal was put out for comment by the finance ministry until July 12.
"The additional requirements for funds ... amounts to some 24 billion Swiss francs for the two big banks," the draft proposal said, noting UBS and Credit Suisse would gradually have to issue this amount of additional bail-in bonds at the holding level.
"As a result, the refinancing costs for both big banks will increase by a maximum of 170 million francs a year," it added, although it called this a conservative estimate that could shrink towards zero as markets reward with lower risk premiums banks' greater capacity to absorb losses.
UBS and Credit Suisse had no immediate comment on the plan, which still has to be finalised and approved by parliament.
The proposal comes amid international efforts to ensure banks have enough capital to withstand losses amid market turbulence without state aid.
UBS and Credit Suisse have operated under so-called "gone concern" rules since 2016, with scaled-down requirements for other big lenders PostFinance, Raiffeisen and ZKB since this year.
The draft released on Friday also suggests tightening capital requirements for loans that finance investments in Swiss residential property amid concerns that the sector is overheating given ultra-low Swiss interest rates.
But it suggests the government forego changes should banks come up with a self-regulation approach that wins approval from the FINMA watchdog.