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IMF backs Federal Council in dispute over UBS capital requirements
🇨🇿 Czech Republic /Economy & Trade

IMF backs Federal Council in dispute over UBS capital requirements

From iDNES · () Czech

Translated from Czech, summarized and contextualized by DistantNews.

At a glance

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  • The International Monetary Fund (IMF) supports the Swiss Federal Council's proposals to strengthen the "too big to fail" regulatory framework for banks.
  • The IMF's assessment praised Switzerland's economic resilience but strongly backed the government's measures for the UBS, calling them a crucial step toward stability.
  • Specifically, the IMF endorsed the requirement for globally systemically important banks to fully fund their foreign subsidiaries with hard equity capital, aligning with international recommendations.

The International Monetary Fund (IMF) has thrown its support behind the Swiss Federal Council's proposals aimed at reinforcing the regulatory framework for banks deemed "too big to fail." This backing comes as UBS, Switzerland's largest bank, lobbies Parliament for more lenient regulations.

Diese Massnahmen werden die Schweizer Wirtschaft resilienter und stabiler machen.

— James WalshThe head of the IMF mission, stating the positive impact of the proposed measures on the Swiss economy.

The IMF's latest country assessment, presented in Bern, lauded Switzerland's economic resilience. However, the fund's stance on the UBS situation was notably strong. James Walsh, head of the IMF mission, explicitly stated that the fund "unequivocally supports" the Federal Council's proposal currently before Parliament. He added that these measures would enhance the stability and resilience of the Swiss economy.

Entscheidend ist, sicherzustellen, dass bei Problemen einer solchen Bank die Kapitalausstattung ausreicht, um die Verluste aufzufangen.

— James WalshExplaining the importance of adequate capital for systemically important banks.

Walsh emphasized that countries with globally systemically important banks typically implement higher capital requirements for such institutions. The goal, he explained, is to ensure that these banks have sufficient capital to absorb losses if problems arise. The IMF views the government's proposed measures for UBS as a significant step in this direction.

Im Falle der UBS sind die von der Regierung vorgelegten Massnahmen ein sehr wichtiger Schritt in diese Richtung.

— James WalshCommenting on the specific measures proposed for UBS.

A particularly contentious issue is the extent to which UBS must fund its foreign subsidiaries with equity capital, as some are currently financed with debt. The Federal Council proposes that these foreign holdings be backed 100 percent by hard equity capital (CET-1). UBS has criticized this as an extreme demand that deviates from international standards. The IMF, however, aligns with the Federal Council on this point, describing the proposal as "targeted and welcome" and consistent with international recommendations.

Der Vorschlag, global systemrelevante Banken in der Schweiz dazu zu verpflichten, ihre ausländischen Töchter vollständig mit hartem Kernkapital zu unterlegen, ist zielgerichtet und begrüssenswert.

— IMFThe IMF's endorsement of the requirement for foreign subsidiaries to be fully backed by hard equity capital.
DistantNews Editorial

Originally published by iDNES in Czech. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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