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An analysis of the country’s most important banks revealed that the liquidity requirements currently imposed would probably not be enough to cover liquidity needs in an emergency or in a default event, the government said in a statement on Friday after adopting its fourth evaluation report on the banks.
A working group including the Finance Ministry, the Swiss National Bank and Swiss banks regulator Finma is being charged with the task of coming up with ways to adjust the requirements, the statement said. The Finance Ministry should also draw up proposals on how incentive systems for big banks could be improved.
The Swiss regulators are taking a closer look at lenders’ stability, against the backdrop of a turbulent few months in the sector. The collapse of Archegos Capital Management imposed losses on both Credit Suisse and UBS this year, with the former suffering a double blow after the failure of trade finance firm Greensill Capital.
Finma requested a Pillar 2 capital add-on of 1.9 billion Swiss francs ($2.1 billion) related to the Greensill incident for Credit Suisse. Finma also imposed a temporary add-on of 5.8 billion francs to the bank’s credit risk risk-weighted-assets in relation to its exposure to the Archegos situation. The bank also raised $2 billion of fresh funds from investors via convertible notes to shore up its balance sheet.
