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Cabinet seeks tax law change for equity bonds

The government has proposed further measures to promote contingent convertible bonds (CoCos) as part of plans to stabilise the country’s financial sector.

The measures, subject to approval by parliament, are aimed at bolstering the banks’ capital base and prevent the state from having to bail out important companies, the finance ministry said on Wednesday.

The changes to withholding tax on interest from bonds and money market paper used by traders are designed to help banks issue such bonds under competitive conditions in Switzerland and reduce costs for companies, a statement said.

The proposed introduction of a so-called paying agent principle is set to benefit tax-exempt institutional investors, including pension funds.

In an initial step, the cabinet in April decided to propose the abolition of issue tax on bonds and money market paper.

Switzerland is set to require big banks, including UBS and Credit Suisse, to maintain a total capital ratio of at least 19 per cent, including up to nine per cent of CoCos. They convert into equity if a bank runs into financial trouble.

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR

SWI - a branch of Swiss Broadcasting Corporation SRG SSR