k-flash audio commentUBS: Too Big to Fail
k-flash audio commentUBS: Too Big to Fail

The case

The Federal Council has opened a consultation on amendments to the Banking Act as well as the Capital Adequacy Ordinance. The proposals would require systemically important banks to fully capitalise their foreign subsidiaries, with higher capital requirements phased in over seven years. The consultation closes tomorrow.

Source: Swiss press

The commentary

The final draft will probably have to be revised before it is submitted to parliament or presented as an amendment to the ordinance. In the coming weeks, it should become clearer whether the requirements will have to be weakened or only adjusted, e.g. with transitional arrangements or alternative capital instruments such as AT1 bonds.

According to well-informed circles, the responses from the majority of cantons support the Federal Council’s proposals on the issue of necessary capital. It is striking that eight cantons have rejected the Finance Department’s proposals. These are the cantons of Zurich, Geneva and Ticino, which represent a common position, as well as Graubünden, Thurgau, Lucerne, Nidwalden and Zug. Apparently the cantons of Jura, Obwalden and Uri have not responded yet.

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