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Credit Suisse, UBS need more action on capital rules, SNB says
[ZURICH] UBS Group AG and Credit Suisse Group AG need to take further measures to meet Switzerland's new capital requirements, the Swiss National Bank said.
"The big banks need to take action - particularly in meeting the leverage ratio requirements and the gone-concern requirements," the SNB said in its annual financial stability report, published Thursday ahead of its quarterly interest-rate decision.
Switzerland this year increased the amount and quality of capital that the country's two biggest banks have to hold as a buffer against shocks, expressing this as a share of total assets, called the leverage ratio.
UBS and Credit Suisse have until the end of 2019 to issue bonds and build up capital to comply with the rules, designed to protect the economy from the collapse of one of its two banks.
Credit Suisse and UBS need additional going-concern capital amounting to roughly 10 billion francs (S$14.06 billion) each, the SNB said, referring to higher-quality debt instruments that count toward the leverage ratio.
The two systemic banks need to issue gone-concern instruments between 20 billion francs to 25 billion francs or replace debt instruments that fall due with bail-in instruments, the central bank said.
This assumes that their exposure remains constant and doesn't take into account any possible reductions on gone-concern requirements, such as potential future rebates granted by Swiss regulator Finma.
In terms of risk-weighted going-concern requirements, UBS already meets the requirement and Credit Suisse is very close to meeting it, the SNB said.
"Yet it is likely that RWA will increase in light of the measures drawn up by the Basel Committee - which include the introduction of RWA floors based on the revised standardized approach," the SNB said.
Switzerland introduced too-big-to-fail rules in 2012 after the government came to UBS's rescue during the 2008 financial crisis.
The two banks present a bigger risk to their local economy than their peers elsewhere because their combined assets of 1.78 trillion francs amount to almost three times Switzerland's gross domestic product.