Zurich (Reuters) – The Credit Suisse crisis in 2023 highlighted gaps in the regulatory banks of banks in Switzerland, in terms of capital requirements and liquidity in particular, the Swiss National Bank which supports the Federal Council for reinforced on Tuesday aimed at strengthening the resilience of banks and their capacity for sanitation and liquidation in the event of a crisis.

Switzerland has undertaken to introduce stricter banking regulations in response to the collapse of Credit Suisse, which was then bought by its former UBS rival.

At the center of the proposals made by the government last year is the need for UBS to improve its equity ratios in order to strengthen its solidity and avoid a new scenario similar to that of Credit Suisse.

The ratio level that UBS should have, however, is the subject of a keen debate and focuses on the degree of capitalization of its foreign subsidiaries, the Swiss National Bank having stressed in its 2024 management report “the insufficiency of the coverage of participations in the subsidiaries”.

“The BNS noted that the parent company of UBS had a more robust capitalization than that of the Credit Suisse before the crisis; however, the existing equity regime presents gaps which must be filled,” it can be read in the report.

UBS claims that it is already well capitalized compared to its world competitors and that making it hold additional billions of dollars risks disadvantage and threatening Switzerland’s competitiveness as a global financial center.

The Swiss National Bank has been positive as to the integration of Credit Suisse by UBS, believing that “the situation of the entities which were previously part of Credit Switzerland has stabilized following the takeover by UBS”, and judged that UBS has entered “in a transition phase which will extend over several years”.

“UBS already satisfied the future anticipated requirements for the merged group under Too Big to Fail (TBTF) regulations. The evolution of market indicators such as premiums for failure coverage (Credit Default Swaps, CDS) and the course of action reflects a positive evaluation by the prospect market of the merged bank” detailed the institution.

The potential for losses of UBS remains “substantial” nevertheless according to the Swiss National Bank for which “integration costs and the losses expected due to the liquidation of significant risk positions inherited from Swiss Credit indeed limit the absorption capacity of UBS losses.”

(Written by Dave Graham, Bertrand de Meyer, edited by Augustin Turpin)

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