Switzerland Creates 'Too Big to Fail' Rules to Make Banks Safer Following Credit Suisse Collapse

By Madz Dizon

Apr 10, 2024 10:25 AM EDT

Switzerland Creates 'Too Big to Fail' Rules to Make Banks Safer Following Credit Suisse Collapse
A sign of Swiss giant banking UBS is seen above a sign of Credit Suisse in Zurich on August 30, 2023 on the eve of the of the announcement of its first results since Credit Suisse merger.
(Photo : FABRICE COFFRINI/AFP via Getty Images)

Switzerland is taking steps to strengthen regulations for banks deemed systemically important.

This decision comes after a thorough review of the crisis that occurred at Credit Suisse last year, which revealed shortcomings in the current regulatory framework. 

Switzerland Urges to Tighten Banking Rules

On Wednesday, the Swiss government announced that UBS, the sole remaining global systemically important bank in Switzerland following its acquisition of Credit Suisse, will face increased capital requirements due to the proposed changes.

Other banks and financial institutions are also subject to certain measures, according to the statement.

The government has announced plans to strengthen the capital requirements for banks considered systemically important. These requirements will be targeted and supplemented with a forward-looking component.

In addition, the government is currently considering granting Swiss financial regulator Finma the authority to levy fines, according to a statement.

Finance Minister Karin Keller-Sutter informed the press that the measures will be implemented to protect taxpayers and the Swiss economy as a whole, considering the potential risk of a significant banking sector collapse.

According to Keller-Sutter, the proposed measures would aim to enhance liquidity at financial institutions and address the issue of excessive bonuses received by certain bankers.

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Credit Suisse Collapse

The announcement comes after Swiss authorities conducted a thorough review, which uncovered certain deficiencies in the existing regulation. As a result, the government has introduced a comprehensive package of 22 measures, AP News reported.

The implementation of the package is expected to greatly decrease the chances of another major bank in Switzerland facing a severe crisis and requiring state intervention, according to the statement.

Last year, Swiss authorities were concerned about the potential impact on global financial markets if Credit Suisse, a significant lending institution, were to collapse, especially in light of the recent failures of two US banks. The turmoil hurt Switzerland's standing as a prominent financial center., according to SFGate.

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