Switzerland tightens bank liquidity rules

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The Swiss authorities on Wednesday tightened liquidity rules for the two biggest banks Credit Suisse and UBS, requiring them to have enough reserves for at least 30 days should a bank run occur.

"In the interests of a stable Swiss financial centre, the Swiss Financial Market Supervisory Authority and the Swiss National Bank have ... substantially revised the liquidity regime for big banks," the financial regulator and the central bank said in a joint statement.

The new rules require the banks to hold sufficient "first-class liquid assets" to cover outflows over a period of at least 30 days should there be a crisis on the financial markets coupled with a loss of confidence.

"These requirements are to allow the minimum time necessary for the big banks and the authorities to mitigate a crisis situation," the statement said.

The new rules come into force on June 30 this year.

The liquidity buffer will come on top of stricter minimum capital ratio requirements already imposed on the big banks more than a year ago.

Under those rules unveiled in December 2008, the banks would have to meet a capital adequacy ratio -- a measure of their financial health -- up to twice as high as the international minimum requirement by 2013.

The capital adequacy ratio measures a bank's own funds in relation to the risks it is likely to incur in its operations.

Since the international Basel II accord currently has a minimum capital ratio set at 8.0 percent, the 2008 Swiss rules would require the two big banks to raise their ratio to 16 percent.

© 2010 AFP

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