Switzerland put forward on Wednesday proposals for UBS (UBSG.S) and three other systemically relevant banks aimed at protecting the country from a repeat of last year's Credit Suisse collapse.
The government's 209-page report outlines 22 measures designed to strengthen current regulations for banks known as "too big to fail" (TBTF), after gaps were found in the existing rules following UBS's rescue takeover of its banking rival.
The proposals aim to improve corporate governance and supervision, for example, by giving more powers to Swiss financial market regulator FINMA.
They also aim to make the banks more resilient by increasing capital requirements and ensuring liquidity in a crisis, as well as improving cooperation between authorities.
Following are some of the main recommendations:
* Capital requirements for systemically important banks should be tightened in a targeted way and supplemented with a forward-looking component.
* Preference should be given to measures aimed at strengthening capital requirements of systemically important banks, the report said, without giving figures.
* Strengthen capital requirements for foreign participations – and thus for parent banks – within a financial group.
* Examine the requirements for remuneration systems, especially on the design of variable remuneration and clawbacks.
* Better define corporate governance requirements at banks by strengthening the requirements on the board of directors and their responsibility for corporate culture.
* Introduce a senior managers regime to ensure a clearer assignment of responsibilities.
* Allow public disclosure of supervisory procedures; FINMA's right to issue fines will be examined.
* Strengthen the risk-bearing function of AT1 capital instruments on a going-concern basis by having clear criteria for suspending coupon payments.
* Abolition of AT Capital Instruments, whose write-off was a contested part of the Credit Suisse rescue, was rejected.
* Examine improving cooperation between the various authorities in a crisis. The government, FINMA and Swiss National Bank have been criticised for letting the situation at Credit Suisse worsen before they eventually intervened.
* Introduce a public liquidity backstop for systemically important banks. The provision of liquidity in the Credit Suisse case only came about through the application of emergency law.
* Creating the legal option for a temporary public ownership of a bank in crisis as final resort was rejected, due to the potential moral hazards.
