SNB Places Raiffeisen Alongside UBS as Too-Big-to-Fail Bank
(Updates with minimum capital standard in ninth paragraph.)
Aug. 13 (Bloomberg) — The Swiss central bank classified Raiffeisen Group, a privately held bank owned by its customers, as a lender subject to tougher rules because of its systemic relevance to the country’s economy.
The Swiss National Bank determined that Raiffeisen provides “essential” services for the country that cannot be substituted in the short term, the lender said in a statement today. Raiffeisen joins UBS AG, Credit Suisse Group AG and Zuercher Kantonalbank in being declared too big to fail by the regulator.
The SNB is stepping up oversight of the nation’s lenders to prevent a repeat of the fallout of the financial crisis that in Switzerland led to a state bailout of UBS. The regulator has urged for buffers against losses for big banks that go beyond the Basel III global rules and toughened capital requirements for banks allotting domestic mortgages to boost their resilience to writedowns as home prices have soared.
Raiffeisen, a cooperative with 305 independent member banks and total assets of 183 billion Swiss francs ($202 billion), is at an advantage in planning for an emergency because it’s more transparent than a large company, Chief Executive Officer Pierin Vincenz said on a conference call today.
The Swiss central bank may classify lenders as systemically important based on the size of assets, market share of domestic deposits, loans and payments as well as the company’s risk profile, quality of assets, liquidity and leverage.
Emergency Planning
Raiffeisen is the leading retail bank in the country, with 3.7 million customers, according to its website. Raiffeisen’s member banks have 147 billion francs of mortgages, representing 17 percent of the Swiss market, the website shows. It has 140.7 billion francs of deposits and assets under management of 192.3 billion francs.
Risks to the Swiss real-estate market increased “marginally” in the second quarter as growth in home prices and mortgages outpaced that of income, UBS said in a report on Aug. 5. At its policy review in June, the Zurich-based SNB signaled concern about mortgage lending.
Raiffeisen’s market position in the domestic deposit and credit business was decisive for the SNB’s ruling, the bank said in the statement.
The bank’s total capital ratio, a measure of financial strength, was at 15 percent at the end of June, the bank said in a presentation today, above the 14 percent minimum for lenders deemed too big to fail in Switzerland.
Raiffeisen will have to prepare an emergency plan to keep systemically relevant functions running and is working with with Finma to implement the requirements, it said.
Net Income
“It will take months until the measures are actually implemented,” said Rocco Schilling, a Zurich-based credit analyst at Vontobel Holding AG.
Raiffeisen, based in St. Gallen, Switzerland, posted earnings for the first half of 2014 today. Gross profit was 533 million francs, with net income at 364 million francs. The net result was little changed from 369 million in the year-earlier period.
–With assistance from Catherine Bosley in Zurich.
To contact the reporter on this story: Jeffrey Vögeli in Zurich at jvogeli@bloomberg.net To contact the editors responsible for this story: Elisa Martinuzzi at emartinuzzi@bloomberg.net Simone Meier
