Switzerland is planning to set higher capital buffers for the top banks in the country to ensure that they are adequately capitalised during potential crisis.
The country’s Finance Ministry is planning to revise the capital adequacy rules of the banks, Bloomberg reported citing a government statement.
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If implemented, the new capital rules will require prominent lenders such as UBS Group and Credit Suisse Group to earmark additional CHF24bn ($24bn) in reserves.
The total refinancing costs for the two banks will also increase by CHF170m, the government report added.
Consultations on the new proposals will continue till 12 July this year.
UBS told the publication that it will comment after reviewing the draft. Credit Suisse said that the proposal is ‘in line’ with its guidance.
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By GlobalDataBank capital buffer revision: Background
The revision of the bank capital buffers is primarily driven by concerns that during another financial crisis most of the big banks’ capital could be reserved for foreign locations.
Accordingly, sufficient funds will not be for Switzerland, according to Swiss newspaper Neue Zuercher Zeitung.
The bank capital buffer revision proposals will ensure that the banks will hold sufficient funds with their Swiss units.
Following the financial crisis in the last decade, the Swiss government introduced too-big-to-fail rules. The introduction led to increased capital holding as buffer by UBS Group and Credit Suisse Group in 2016.
