Bern, Switzerland (GenevaLunch) – Swiss banks will have tougher capital requirements for trading, known as the Capital Adeqacy Ordinance, starting 1 January 2011, a year ahead of the rest of the world, the Swiss Federal Council (cabinet) announced Wednesday 10 November. New capital requirements have been drawn up by the Basel Committee of central bankers, known as Basel III, but the committee delayed the implementation deadline under pressure from countries. US Treasury Secretary Timothy Gleisner and the European Commission’s internal market commissioner Michel Barnier agreed in October 2010 to a December 2011 deadline for the new trading book rules.
Switzerland has already taken a number of protective steps in the wake of the December 2008 bailout of UBS, the country’s largest bank: higher overall capital requirements and tougher rules on liquidity were adopted for the country’s big banks in October 2010. New rules also created restrictions on bankers’ pay and a cap on the leverage ratio.
The Federal Council noted in its press release on the decision that “the financial crisis made it quite clear that the risks of loss attached to trading activity and securitization were underpinned by insufficient capital levels.
“In July 2009 and June 2010, the Basel Committee was the first to publish accordingly more stringent regulations as a response to the financial crisis. These regulations should be adopted unchanged in Swiss regulations.” New European Union standards were also drawn up in July 2009, notably “improved standards on risk diversification, in particular in the interbank market”, the “most important” of which Switzerland has integrated into its revised regulations. “The remaining, amended standards [will be adopted] together with the implementation of Basel III in Swiss law.”
The new regulations, says the government, “will have a tangible impact on the Swiss big banks in particular but has no direct link with the ‘too big to fail’ debate. The stricter regulations envisaged will affect the big banks to the same degree as their international competitors. They will also hit the other banks to varying degrees.”