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Credit Suisse, Zurich

Basel and Zurich, Switzerland (GenevaLunch) – The financial world heaved a collective sigh of relief at the agreement announced Sunday 12 September by the 27 countries that are members of the Basel Committee on Banking Supervision. For months, the financial press has been speculating about the final deal, called Basel III, to set bank capital requirements, the ratio of highest-quality assets that banks hold against future losses.

Now there is industry fear that national regulators will go further than the Basel III requirements, with evidence this is already happening in some countries, led by Switzerland, calling for even more stringent capital requirements.

Basel III in the end was less demanding than some feared, with an agreement to triple the ratio to an effective 7 percent from today’s 2 percent.

Germany in in particular pushed for restraint, arguing that too much of an increase too quickly would deplete bank’s resources and slow down the economy.

In the two days since the announcement, fear of too-high demands have swung to fears that some countries, notably Switzerland, the US and the UK, will insist on yet higher ratios for their own banks.

Switzerland’s regulatory body, Finma, consulted widely on changes to Swiss requirements, with four circulars covering regulation in this areaa, from mid-July to mid-August 2010 (key points, Finma). Shortly before, Finma issued the results of stress tests on the country’s two largest banks, Credit Suisse and UBS, saying the two passed the tests, carried out since 2008. But the new circulars are likely to be even tougher, Finma noted in July: “The regulations foreseen will particularly affect Swiss big banks in terms of capital adequacy. The tightening in regulations is, however, applicable to all financial institutions and is not a result of the too big to fail debate.”

Video, Financial Times