Swiss banks hit by tough new credit ratio rules

Steve Dinneen
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Switzerland has imposed strict new rules on UBS and Credit Suisse, telling them to hold far more capital than their international rivals to ward off a crisis that could cripple the country.

The two banks must hold an equity tier one capital ratio of at least 10 per cent under the proposals laid out by a government commission.

The new Swiss rules go well beyond the new international standards set out three weeks ago, which require banks to hold a minimum core tier one ratio of seven per cent.

Altogether the Swiss giants must hold capital equal to a total of 19 per cent of risk-weighted assets, compared to a global agreement of just 10.5 per cent.

However, the Swiss institutions have until 2018 to meet the supplementary targets, while Basel III guidelines should be implemented by 2013.

The Swiss commission of regulators, bank executives and other industry figures said that a mixture of measures was needed to reduce the risk of having banks with a “too big to fail” problem.

The new rules were seen as a move to restore confidence to Switzerland’s crucial private banking industry, but could crimp the ability of the country’s two biggest banks to compete in global investment banking.