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Keller-Sutter Aims to rein in Ermotti: Federal Council’s Plan to avert Banking Crisis
The Federal Council is firm on imposing stricter capital regulations on UBS. Federal President Karin Keller-Sutter urges parliament to resist bank lobbying efforts.
Demonstrate unity: Federal President karin Keller-Sutter (center), National Bank President Martin Schlegel and Marlene Amstad, President of the financial market supervision.
Federal President Karin Keller-Sutter presented the Federal Council’s strategy to prevent another major banking crisis, accompanied by National Bank President Martin Schlegel and the President of the Financial Market Authority (FINMA). This united front echoed the emergency measures taken on March 19, 2023, when Credit Suisse was acquired by UBS.
Following the Credit Suisse debacle, a parliamentary investigation (PUK) was launched, and Finance Minister Karin Keller-Sutter conducted an in-depth analysis of the bank’s downfall.
The Federal Council now proposes a series of measures to tighten control over systemically important banks, notably UBS. According to Federal President Keller-Sutter, the goal is to strengthen Switzerland and mitigate risks to the state, taxpayers, and the economy. Both SNB President Schlegel and Finma President Amstad voiced their support for the proposed regulations.
The central measures in the overview:
- Sharper equity regulations: The most contentious point,facing strong lobbying from UBS. The Federal council insists that UBS, as a parent company, must back new participations in foreign subsidiaries with 100 percent equity, up from the current 60 percent. This increase is deemed crucial for UBS to better withstand crises, though it could cost the bank up to CHF 26 billion.
- More skills for supervision: FINMA’s powers will be expanded, allowing it to intervene earlier and more effectively when a bank shows signs of instability.Banks failing to comply with regulations could face severe penalties.
- Clear responsibilities: Banks will be required to clearly define the responsibilities of their managers,enabling sanctions such as bonus cancellations or clawbacks in the event of a banking collapse.
- Strengthen liquidity: Banks must establish liquidity preparedness plans, contractually agreeing with customers to allow loans to be transferred to the SNB as security during a crisis.
“the parliament has to look the citizens in the eye.”
While some measures fall under the Federal council’s direct authority,most require legislative changes,particularly the stricter capital regulations. Keller-Sutter chose to involve the parliament for political reasons. The changes are expected to take effect no earlier than 2028, with UBS given six to eight years to implement them.
