Bank safeguards mooted to resist financial shocks

The cabinet is seeking a series of measures designed to prevent the state from having to use tax revenues to bail out important banks facing insolvency.

This content was published on December 22, 2010 minutes

The measures include strengthening the capital bases of the country’s two major banks, more stringent liquidity requirements and better risk diversification, according to a statement by the finance ministry.

The package is based on proposals by a group of experts who put forward proposals to alleviate the too big to fail problem following the financial crisis of the UBS bank.

“The government added more detailed regulations over the leverage ratio, including reserve capital and convertible capital, as well as the organisational structure of important banks,” Finance Minister Eveline Widmer-Schlumpf said on Wednesday.

To boost the capital market, the cabinet also seeks to promote the issue of bonds and to do away with a stamp duty on debt capital and withholding-tax charges. “Switzerland as a business location will benefit from this,” Widmer-Schlumpf added.

Political parties, organisations and institutions now have until next March to give their opinions to the draft.

Parliament is expected to begin debates on the bill in spring to put the legal amendment in force in 2012.

Two years ago the government agreed a bailout package worth up to SFr60 billion ($62.7 billion) to strengthen the capital base of the UBS bank and reduce its balance sheet.

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