This now threatens Swiss banks

class=”sc-3778e872-0 cKDKQr”>

Continuing as before is not an option. Parliament agreed to this at the extraordinary session on the CS rescue this week, despite disagreements. The politicians outdid each other with demands and ideas about how the financial system can be more tightly regulated and a new banking debacle can be prevented.

Over the two days, they submitted more than three dozen proposals related to banking regulation. Much comes from the SVP, SP and Greens – those parties that sent the billions in credit for the CS rescue bachab. Center and FDP each submitted only three proposals, the Green Liberals not one.

These are the main requirements and their chances of success.

The CS rescue shows that the “too big to fail” rules don’t work, at least in part.

The SVP wants to change that. In an initiative she demands that no bank should be too big to fail. If that is not possible, parts of the bank must be closed or sold.

It seems inconceivable that this plan will find a majority. It’s just as hard to imagine the rules staying the same. The parliament has required the Bundesrat to present a report by the end of the year on how the rules can be adjusted.

The left wants systemically important banks to pay for having an “implicit state guarantee”. Since such risk premiums already exist in individual cantonal banks, there is a good chance that the claim will be accepted at the national level. SVP National Council member Benjamin Fischer (31) takes a similar approach.

The exorbitant bonus payments at CS have been the subject of criticism for years. The factions outdo each other in that regard with demands. In several motions, the SVP demands a bonus cap for the top management of the Bundesrat. For example, the council of states of Thurgau, Jakob Stark (64), wants to set it at 3 to 5 million. Another SVP requirement is that part of the bonuses must be paid back in a state rescue.

The SP wants a total ban on bonuses for the management of systemically important banks.

Reclaiming bonuses or part of the income sounds good – but is also unlikely to have much success. Many banks do not pay part of the bonuses immediately, but only pay them out a few years later.

In addition, the Bundesrat already wrote in 2017 in response to a similar motion that an absolute ban on bonuses and a wage ceiling would be too restrictive and would be contrary to economic freedom.

The parliament has instructed the Bundesrat to examine the introduction of a so-called segregated banking system. In such a bank, a bank can only be a commercial bank or an investment bank – not both. An advantage would be that it provides more certainty for account holders. The Greens have emphasized this demand with a separate initiative.

About ten years ago, parliament discussed a separate banking system. The National Council was in favour, the Council of States against. This fate threatens again. Unless the majority changes in the fall election, the issue is likely to fail again in the small chamber.

In Switzerland, 100,000 francs per customer are guaranteed by the state in the event of a bank failure. The Greens want to increase this deposit guarantee. For example, in the US it is about $250,000.

Experts believe that an increase in deposit insurance could certainly help. Because that would strengthen Switzerland’s credibility as a location for customers.

Politicians want to force banks to set aside even more money for hedging. After the rescue of UBS, the Federal Council tightened the rules for large banks. Still, the end of the CS could not be averted. Financial experts have a quota of 20 to 30 percent in mind – today it’s about 5 percent.

Finance Minister Karin Keller-Sutter (59) announced during the extraordinary session that the federal government wants to increase the equity ratio regardless of the CS debacle. Whether it will be 20 to 30 percent is doubtful.

The Greens remain faithful to their program and are also fully committed to sustainability in the banking sector. For example, they advocate creating climate-weighted equity requirements to mitigate climate risks and linking state aid to sustainability criteria.

Source:Blick