How to buttress Switzerland against banking failure

Lawmakers and regulators must work out how to avoid another financial crisis. KEYSTONE/© KEYSTONE / MICHAEL BUHOLZER

The forced sale of Credit Suisse to its banking rival UBS has created a headache for Switzerland.

The emergency takeover exposed the failure of regulations to prevent an uncontrolled collapse of a major Swiss bank. It also created a monopolistic giant bank with a balance sheet twice the size of the Swiss economy.

SWI swissinfo.ch asked three experts how Switzerland can create a regulatory safety net to shield the country from future problems.

The government and parliament are under pressure to deliver regulatory reforms that will ensure greater stability for the financial system.

But Rudolf Minsch, chief economist of the Swiss Business Federation economiesuisse, warns lawmakers to resist the temptation to create new regulations to micro-manage banks or restrict other financial actors, such as insurance companies.

Centre Party politician Peter Hegglin is of the opinion that Switzerland’s biggest banks must be tamed to prevent a potential catastrophe for the rest of the economy.

Switzerland has too small of an economy to cope with the collapse of a large bank, Hegglin argues.

Adriel Jost, a fellow at the Institute for Swiss Economic Policy, calls on banks to shoulder responsibility by changing the way they go about their business.

The current trend of treating banks as if they are companies in any other sector fails to appreciate the unique complexities of the financial system, Jost says.