Credit Suisse ‘On Target’ to Boost Capital, Raaflaub Says
UBS AG (UBSN) and Credit Suisse Group AG, Switzerland’s biggest banks, are “on target” to boost equity to conform with new capital requirements, said Patrick Raaflaub, head of the Swiss Financial Market Supervisory Authority. (SMI)
“Supervised institutions must ensure that their equity base is strong enough to absorb shocks without resorting to government bailouts,” Raaflaub said in a speech at a conference in Zurich today. “Some progress has been made in this respect: banks operating in Switzerland are, generally speaking, well capitalized.”
Credit Suisse said in July it plans to boost capital by 15.3 billion Swiss francs ($16 billion) this year after the Swiss National Bank urged a “marked increase” in the annual financial stability report. UBS should continue with its plan to improve capital ratios by cutting assets, retaining earnings and limiting dividend payments, the central bank also said.
“Our country should be an example to follow in important areas such as equity capital and liquidity,” Raaflaub said, adding that the current market environment is “demanding” and “challenging times are in store” for the Swiss financial industry.
The Swiss regulators are running ahead of international peers in implementing stricter capital and liquidity requirements after the government had to prop up UBS with 6 billion francs to help it spin off illiquid assets into an SNB fund in the aftermath of the bankruptcy of Lehman Brothers Holdings Inc. in 2008.
UBS and Credit Suisse will have to hold total capital, equal to about 19 percent of risk-weighted assets starting in 2019. Under Basel III rules, banks worldwide will need to have minimum capital ratios of 10.5 percent, while stricter rules can be imposed by national regulators, and firms deemed systemically important will need more.
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