Banks are still "too big to fail", says SNB chairman

ZURICH, Sept 14 Sat Sep 14, 2013 4:26am EDT

ZURICH, Sept 14 (Reuters) - More still needs to be done to let global banks be wound down without harming the wider economy, Swiss National Bank Chairman Thomas Jordan said in a newspaper interview published on Saturday.

"The too-big-to-fail problem is not yet fully solved," Jordan told Finanz und Wirtschaft.

Authorities have been grappling since the collapse of U.S. investment bank Lehman Brothers five years ago with the question of how banks regarded as systemically important, or too-big-to-fail, can be recapitalised without causing panic or needing taxpayer cash.

After Switzerland's biggest bank UBS had to be bailed out by the government in 2008, Swiss regulators have implemented tough new capital requirements for banks, which go beyond the rules stipulated by Basel III.

"If the winding down isn't possible then the buffers will have to be raised accordingly," said Jordan, adding there were several possibilities including contingent-convertible bonds.

In its yearly stability report published in June, the SNB urged UBS and Credit Suisse to further improve their leverage ratios. The Swiss financial market regulator requires a leverage ratio of 4.3 percent by 2019.

"What matters now is that banks implement the respective requirements consistently and rapidly," Jordan said. "Whether further measures will be necessary depends above all on whether the goal of an orderly winding down of major international banks is achieved."

Jordan said he did not think it would be better to separate investment banking from retail banks.

"As long as banks have sufficiently high equity capital and a structure that lets them be unwound at their disposal, they can choose their preferred business strategy themselves," he said.

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Comments (1)
MassResident wrote:
This isn’t complicated. The oversize banks need to be broken up. Their fondness for irresponsible financial instruments is a direct consequence of “too big to fail”. Either they are too big to exist or they are not too big to fail.

Sep 14, 2013 9:24am EDT  --  Report as abuse
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