ZURICH – UBS Group (NYSE: UBS) would be given time to build up the necessary capital buffers to protect itself against financial difficulties, Swiss National Bank (SNB) Chairman Thomas Jordan said in an interview published on Saturday.
Jordan told the Neue Zuercher Zeitung newspaper that improvements were needed in the wake of last year’s Credit Suisse crash to enable troubled Swiss banks to be wound up or restructured without crashing the country’s financial system.
This also included adjustments on the capital side, Jordan said, in his last interview before he stepped down from the central bank at the end of September.
“I am convinced that good capital requirements are an advantage for an internationally active bank,” Jordan told the newspaper. “An important part of the package is a strengthening of the capital regime for the parent company.”
UBS (NYSE: UBS) has already flagged major concerns about the Swiss government’s plans to demand it holds additional capital.
The bank is awaiting clarity on the government’s plans. However, it may need to find between $15 billion and $25 billion in additional capital to comply with new requirements designed to protect Switzerland from a repeat of the Credit Suisse collapse.
Jordan said UBS would be given time to build up the relevant capital.
“It will also not be the case that UBS will have to hold additional equity capital overnight,” he told the newspaper. “It would be given enough time to make adjustments.”
Jordan also proposed three changes to ensure a restructuring or a liquidation of a bank in dire trouble could be financed.
This included an accurate valuation of capital and measures to ensure that convertible capital can be converted legally without any problems.
An adequate distribution of capital between the parent company and subsidiaries was also needed, so that in a crisis decisions could be made at a group level without causing problems in the parent company, he said.
“All these were problems that became apparent during the Credit Suisse crisis,” Jordan said.
“The challenge is now to choose an overall package of corrective measures, that mitigates the risks that have come to light and allows UBS to operate successfully from here.”
(Source: ReutersReuters)
