Switzerland has set out to further pull the reins on global banks UBS and Credit Suisse, requiring them to hold capital well in excess of new international standards and potentially crimping their competitiveness in investment banking.
The report from the government commission of top regulators, bank executives and other industry representatives published on Monday said the two banks should hold at least 10 per cent of risk-weighted assets based on new global standards (Basel III) in the form of common equity.
In addition, the banks should hold another 9 per cent, which could be contingent convertible (CoCo) bonds, taking the current total capital requirements to 19 per cent.
The so-called CoCo bonds would be turned into equity if the common equity ratios fell below pre-defined levels. The capital requirements could rise or fall depending on the banks’ balance sheets or if their domestic market share increases.
New Swiss rules go beyond the recently agreed rules under Basel III, which require banks to hold at least 7 per cent in the form of common equity.
However, reports suggested that UBS and Credit Suisse might have to hold even more top-quality capital.
{{/usCountry}}However, reports suggested that UBS and Credit Suisse might have to hold even more top-quality capital.
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