Big Swiss banks face break up
SWITZERLAND yesterday became the latest country to join the global regulatory assault on the banking industry, warning that it could force the break up of large banks like UBS and Credit Suisse because they were too big to fail.
The Swiss National Bank (SNB), which says that UBS and Credit Suisse still pose a risk to the wider economy, has been pressing ahead with tougher regulation after record losses at both banks.
The two banks hold over $3 trillion (£1.84 trillion) in liabilities – about six times Swiss gross domestic product, making the country more exposed to risks from its banks than almost any other.
Even if the country’s economy begins to recover in 2010, the banks still face substantial loan losses, lower earnings and a negative impact on capital, highlighting the need for the pair to shore up their resilience further, the SNB said.
National regulators should urgently address the fact that UBS and Credit Suisse are “too-big-to-fail” as soon crisis was over, the SNB added.
And Swizerland’s central bank said new rules needed to be drafted so that the banks could be broken up in an orderly way if they needed to be.
“One should examine the extent to which, in a crisis, those big bank units that are economically important for the Swiss economy can be split off and possibly transferred to other banks within the country and the rest wound down,” it said in its stability report.