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Market Analysis

SNB Highlights Regulatory Framework Weaknesses Following Credit Suisse Collapse
Amos Simanungkalit · 8K Views

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Following the 2023 collapse of Credit Suisse, weaknesses in Switzerland's financial regulatory framework persist and require immediate attention, according to the Swiss National Bank's recent statement. In response to the crisis, Credit Suisse was absorbed by UBS in a state-backed rescue effort. Concerns about the enlarged entity's systemic risk prompted the government to propose stricter regulations for banks deemed "too big to fail" in April. Key aspects of the proposal include increased capital requirements for UBS, although these measures are still navigating a lengthy political process.

 

In its annual financial stability report, the SNB underscored the need for action on capitalization, liquidity requirements, early intervention protocols, and recovery planning, aligning with the Federal Council's stance. Despite UBS's current stronger capitalization compared to Credit Suisse pre-crisis, the SNB emphasized persistent weaknesses in the existing regulatory framework that must be rectified.

 

Additionally, the SNB advocated for a review of the liquidity coverage ratio, crucial for assessing a bank's cash solvency, especially in light of significant retail deposit outflows during the Credit Suisse crisis that exceeded earlier assumptions. Switzerland's financial regulator, meanwhile, confirmed on Wednesday that UBS's acquisition of Credit Suisse raised no competition concerns, despite recommendations for further scrutiny from the antitrust watchdog.

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.

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