Monday, December 21, 2009

Swiss to Triple Capital Adequacy Requirements

Via Bloomberg news:

UBS AG and Credit Suisse Group AG may have to almost triple the amount of cash they hold in relation to customer deposits under new proposals from Swiss regulators, two people familiar with the matter said.
The two largest Swiss banks may be required to hold 45 percent of customers’ demand deposits worldwide in cash or easy- to-sell securities such as government debt, almost three times as much as under current rules...
The rules as currently envisioned would only apply to the two largest banks, because of concern a collapse of either would endanger the Swiss financial system.
The regulators already introduced stricter capital requirements and a cap on leverage for the two banks. They have said that a stable financial industry is more important for Switzerland than other nations, because banks’ assets are the biggest relative to gross domestic product of any G-10 country.

Should Ireland move in the same direction? Probably not. At least not to the same extent, because the contraction in lending caused by high capital requirements will chill growth and keep us in recession longer.