November 3, 2013 / 8:17 PM / 6 years ago

Swiss Finance Minister wants banks to boost leverage ratios: paper

GENEVA (Reuters) - Swiss banks should be subject to higher leverage ratio requirements, Swiss Finance Minister Eveline Widmer-Schlumpf was quoted as saying on Sunday.

Swiss Finance Minister Eveline Widmer-Schlumpf arrives for a news conference after the weekly meeting of the Federal Council in Bern October 9, 2013. REUTERS/Ruben Sprich

“We need to think about whether we need to further enhance the capital base,” the Schweiz am Sonntag newspaper quoted her as saying.

She said a ratio of 6-10 percent was under discussion.

That is two or three times the required ratio set out by the global Basel III accord, which is being phased in by 2019. Under Basel III, banks will be subject to a leverage ratio requiring them to hold capital equivalent to at least 3 percent of their total non risk-weighted assets.

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 recapitalized without causing panic or needing taxpayer cash.

She added that the change “would automatically mean that the banks need to consider whether they retained investment banking or placed more emphasis on asset management.

“I am still of the opinion that banks should determine their own business. But they must be organized so that the state does not end up being liable.”

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 that go beyond the Basel III rules, which were laid out by a committee of banking supervisors from nearly 30 countries.

But Switzerland’s central bank chief Thomas Jordan said in September that the “too-big-to-fail problem is not yet fully solved”.

In its yearly stability report published in June, the Swiss National Bank urged UBS and Credit Suisse to further improve their leverage ratios.

The paper said a rate of 6 percent would oblige UBS to add 20 billion Swiss francs ($21.92 billion) of equity and Credit Suisse to increase its equity base by 33 billion francs.

($1 = 0.9125 Swiss francs)

Reporting by Tom Miles; editing by Tom Pfeiffer and Ralph Boulton

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