The Swiss government has pushed ahead with plans to make UBS and Credit Suisse reach tough new capital standards, saying the benefit to the economy outweighed costs to the banks.
As it finalised legislation to go to parliament, the Swiss cabinet said the general thrust of a draft law it issued in December was unchanged but it had made a few minor changes following a consultation period.
Finance Minister Eveline Widmer-Schlumpf said Switzerland was compelled to take a tougher line on bank regulation than other countries as UBS and Credit Suisse were so big that any failure could bring down the small Alpine economy.
"There will be adjustment costs for the banks but all in all the net effect will be positive," she told a news conference. "I am convinced that the Swiss banking sector will be the winner."
The government has proposed both big banks will need an equity Tier 1 capital ratio of at least ten per cent, versus the seven per cent minimum set under the Basel III global standards which begin to take effect in 2013.
Both UBS and the powerful right-wing Swiss People's Party (SVP) have warned the plan risks making UBS and Credit Suisse less competitive, raising questions about whether the rules might still be watered down during the legislative process.
Widmer-Schlumpf rejected suggestions the government was rushing ahead with the proposals, saying they had taken more than two years of consultation since the Swiss government was forced to bail out UBS at the height of the financial crisis.
City A.M. Reporter