Swiss bank official defends new regulations

Swiss banking rules which require banks including UBS AG (UBSN) and Credit Suisse Group AG (CSGN) to increase their capital, won’t impair the banks’ competitiveness, Swiss National Bank Deputy Chairman Thomas Jordan said in an interview with Neue Zuercher Zeitung.

It is “important” the banks keep their headquarters in Switzerland, the Zurich-based newspaper quoted Jordan as saying.

Switzerland is at the forefront of a global push for stricter oversight of systemically important banks and the Swiss parliament will have its final say on a draft law proposing tougher rules this autumn.

"The Swiss initiative will considerably ease the 'too big to fail' problem. However, the possibility that the state will have to intervene again cannot be ruled out for all times," Jordan said.

Switzerland had to bail out UBS during the financial crisis, when the bank was on the brink of bankruptcy.

The two banks, which participated in developing the new capital rules, have said they were concerned about competitiveness if Switzerland adopted much stricter rules than regulators abroad.

The fact the new capital requirements would not only apply to the banks on group level, but also to their Swiss parent companies has prompted criticism from the banks.

Parliament will consider the new rules in the coming summer and autumn sittings. If approved, the regulations could come into force in early 2012.

Jordan said that banks must "make an effort" to apply the new rules, noting they could have to build up extra capital and review their organisations.

"But I also want to stress that if these conditions are applied, then the large Swiss banks will be outstanding international finance institutions and will set themselves apart from foreign competition."

In October 2010, a commission of experts advised the Swiss government to take tougher measures than imposed by Basel III international standards, which require banks to raise their high-quality core common equity to 7.0 percent of assets from the current 2.0 percent.

Swiss experts have called for a 10 percent level as well as an additional stock of convertible bonds, which could be turned into capital in case of difficulties.

The Federal Council wants to avoid a repetition of the situation which drove banking giant UBS close to collapse in 2008.

The institution had to be shored up by a multi-billion dollar state rescue package.

UBS recently said it feared negative repercussions for the Swiss finance sector as a result of the new regulations however.