Swiss lawmakers shorten leash on ‘too big to fail’ banks

The forced takeover of Credit Suisse by UBS prompted calls for tighter regulations. Keystone / Michael Buholzer

Switzerland’s parliament backed all proposals for regulation of big banks made by the investigation committee into the demise of Credit Suisse, completing a procedural step that will influence the government’s draft law on UBS capital requirements due in May. 

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Lawmakers in the Senate voted on Tuesday in favor of sending four proposals to the government, after the House of Representatives had already backed them last week:

+ Read about the fight between UBS and Swiss regulators

• Possibilities for granting any relief on capital and liquidity requirements for systemically relevant banks should be limited. Any easing should be reported transparently, be subject to a mandatory time limit and be accompanied by a clear phase-out plan.
• Financial regulator Finma should be strengthened and be on an “equal footing” with big banks. Among other options, lawmakers called on the government to examine giving Finma the power to fine banks and managers, as well as wider early-intervention powers.
• The Swiss National Bank should get the power to require from banks a preparation of collateral so they can, in a crisis, draw on a sufficient amount of emergency liquidity from the central bank.
• The purpose of Switzerland’s regulation of big banks should be revisited. The committee had voiced some fundamental concerns including the regulation being too focused on Switzerland. An overhaul should take into account compatibility with international rules and averting a wider financial crisis.

+How to tame UBS without making the bank toothless

As both chambers of parliament backed the proposals, the government is obligated to present legislation fulfilling the demands. 

Separately from these bills, which originate from the parliamentary probe into Credit Suisse’s downfall, the government is already driving reforms. Those envision measures like boosting the capital requirements for UBS.

+ Where did it all go wrong for Credit Suisse?

The finance ministry is expected to present lawmakers with proposed legislation in May. It’s possible that it will then also pick up Tuesday’s demands from lawmakers in it. 

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