In an article written for Swiss newspaper Der Sonntag, the Vice Chairman of Swiss National Bank Thomas Jordan said that the country’s proposed new banking regulations will ‘massively reduce’ risk during any future crisis.
In an effort to protect the country’s two of the biggest banks, UBS and Credit Suisse, the government initiated legal discussions proposing that banks strengthen their capital base and meet more strict liquidity requirements.
Banks and Financial Institutions have time till March 23 to comment on the proposals after which they will be sent to the parliament for discussion. If approved, the new rules may come into effect by 2012.
“The federal council’s too-big-too-fail bill is a regulatory milestone in the overhaul of financial-market regulation”, commented Mr. Jordan in the article. “If the Swiss parliament approves the proposal, the bill will clearly defuse the too-big-to-fail problem in Switzerland and therefore massively reduce the risk and the costs of a crisis for the Swiss economy”.
After bailing out banking major UBS, the Swiss government was at the forefront of a global push to increase regulatory intervention and oversight of large financial institutions. The new banking norms being discussed under Basel III also requires banks to hold higher capital to survive major losses.
Earlier this year, the Swiss government had formed a commission of experts seeking opinion to prevent future crises, of which Jordan was a member. The government’s proposed new regulations are based on the committee’s recommendations.