UPDATE 1-Swiss unveil tougher liquidity rules for UBS, CS

* UBS, CS must hold top, liquid assets to weather crisis

* Rules come into force on June 30

* Liquid assets to weather outflows over 30 days in crisis

* Adjustments to upcoming global rules may be needed

* UBS says meets new rules, CS on track to meet them

(Adds details, background)

By Sven Egenter

ZURICH, April 22 (BestGrowthStock) – Switzerland tightened the reins
on UBS(UBSN.VX: ) and Credit Suisse(CSGN.VX: ) by requiring its main
banks to hold enough liquid assets such as cash and top-notch
bonds to weather a severe crisis without government help.

Switzerland, a small country with a large financial sector,
has led the global push for stricter bank rules after it had to
bail out UBS, whose risky bets led to more than $50 billion in
writedowns and huge losses.

The new liquidity regime comes on top of already introduced
tougher capital requirements, a leverage ratio and new rules on
bankers’ pay for the the country’s two giant banks.

The core element of the new set of rules is the “tough
stress scenario”, which combines a widespread financial markets
crisis with creditors losing trust in a bank, Swiss regulator
FINMA and the Swiss National Bank said in a joint statement.

“The new liquidity regulations require that the banks — in
particular by holding an adequate reserve of first-class liquid
assets — are able to cover the outflows estimated in such a
scenario over a period of at least 30 days,” they said.

The new rules will come into force as of June 30.

A spokesman for the Swiss National Bank said the new rules
followed a different concept from the regulation currently in
place and therefore were not directly comparable.

“But they are stricter than the old rules,” SNB spokesman
Werner Abegg said.

A UBS spokeswoman said the bank was already meeting the new
Swiss rules and a Credit Suisse spokesman said Switzerland’s
second largest bank by assets was well-positioned to meet the
new requirements by the end of the second quarter of this year.


Switzerland is also planning new legislation addressing the
risk that a failure of one of its two large banks could drag the
whole economy down.

A government commission — which includes top officials from
the SNB and FINMA — is due to present an interim report on the
too-big-to-fail issue on Thursday.

SNB Vice-Chairman Thomas Jordan pointed out last month UBS
and Credit Suisse held a key position in the domestic credit and
deposit market. Their overall debt was more than four times the
country’s gross domestic product, which stood at some 540
billion Swiss francs ($509 billion) in 2009.

In the statement about liquidity rules, FINMA and the SNB
did not provide details on the stress scenario or precise levels
of required asset holdings.

Such liquid assets include cash, banks’ sight deposits with
the central bank, top-rated government bonds, Swiss covered
bonds and other comparable asset types, a FINMA spokesman said.

The new Swiss rules may have to be adjusted once the Basel
Committee on Banking Supervision has finalised its own
standards, Swiss regulators said.

The Basel proposals on new banking regulation published in
December also include a liquidity coverage ratio and require
banks to hold enough liquid assets to weather a severe stress
scenario. [ID:nLDE60D1SB]

In addition, the Basel committee has proposed a net stable
funding ratio, which asks for a minimum amount of stable funding
over a one-year horizon. The FINMA spokesman said Switzerland
may adopt such a ratio should it be in the final Basel proposal.

Stock Research

(Editing by Stephen Nisbet)

UPDATE 1-Swiss unveil tougher liquidity rules for UBS, CS