Wednesday , December 2 2020

The Federal Council adopts stricter rules: Postfinance and Raiffeisen need more capital

The Federal Council has adopted stricter rules for large domestic banks. In addition, the government announced that there is more capital requirement for UBS and Credit Suisse.

Hansueli Schöchli

The systematic systematic system in Switzerland also includes the Zürcher Kantonalbank (ZKB), Raiffeisen Group and Postfinance. (Image: Peter Klaunzer / Keystone)

The systematic systematic system in Switzerland also includes the Zürcher Kantonalbank (ZKB), Raiffeisen Group and Postfinance. (Image: Peter Klaunzer / Keystone)

In a chair with three legs, when one of the legs breaks, the man starts to break. The same applies to the economy when a large bank is introduced. That's why the state saved UBS in 2008. To reduce the risk of taxpayers in the future crises of such ılaştır systemically important ği banks, capital adequacy requirements worldwide are significantly tightened.

This also applies to Switzerland. Global large banks UBS and Credit Suisse will meet the following conditions at the group level in the future: at least CHF 5 equity for normal operations per CHF 100 balance sheet and about 4 CHF for loss capital in an emergency. In addition, there are capital requirements based on the risks of assets.

The systematic systematic system in Switzerland also includes the Zürcher Kantonalbank (ZKB), Raiffeisen Group and Postfinance. On Wednesday, the Federal Council issued a regulation to tighten its funding rules for these three institutions. Due to earlier decisions, three banks will require at least 4.5% and 4.6% equity rates, respectively, for normal operations. In addition, capital requirements based on the risks of balance sheet assets should also be taken into account. In addition, each of the three institutes must maintain at least 1.8 to 1.9% of the lost capital for a death scenario (ay emergency capital esi). If the banks create these securities with shares, an amount of approximately 1.2% of the total balance of the balance sheet is sufficient.

Conflict over ZKB State Guarantee

The new rules will enter into force from the beginning of 2019, which is a transition period until 2025. Due to the state guarantee, the need for an emergency pad will be reduced to half. ZKB and the canton of Zurich have lobbied to give the state guarantee a full credit and thereby waive the additional capital obligation, but failed to do so with the Federal Council; the federal government argues that securing the state alone in a crisis cannot ensure the rapid availability of emergency capital. Despite this dispute, the ZKB already fulfills the capital requirements after the transition period.

This is not the case for Raiffeisen and Postfinance. According to the new species, Raiffeisen needs 1.3 to 2 billion francs by 2026, depending on the type of fund. According to Raiffeisen, Raiffeisen plans to raise this additional capital by earning additional profits by members of the cooperative. In 2016, Raiffeisen reported a net profit of more than 900 million CHF for 2017, compared to CHF 750 million.

Under pressure, Postfinance under pressure. The Financial Market Authority has been demanding a special fee for interest rate risks for some time. And above all, the winning power collapsed so sharply because of the low interest rates the Federal Council was forced to flee to the front, and this September decided to remove the ban on credit transactions for Postfinance. However, it is controversial whether this will be a majority in parliament.

According to the federal government, Postfinance requires additional funding of CHF 2.2 billion by 2026 due to new capital rules and the current balance sheet structure. If postfinance provided this security with equity capital, this requirement fell to about 1.5 billion CHF. The Federal Council wants to use equality, mainly as explained in September. The focus was on the retention of profits, the additional capital benefits of the postal group and the un introduction of the funds later on by the shareholders in the opening of the association Od.

UBS and CS again in landscapes

The two big banks must deal with new challenges. Despite tighter capital adequacy rules at the Group's level as a whole, and despite outsourcing to separate legal entities from two systemically accepted major banks in Switzerland, Swiss authorities have still not been satisfied. They worry that a large part of the global capital pillow of UBS and Credit Suisse will be reserved for major foreign places, such as the United States and the United Kingdom, so there will be very little flooring for Switzerland in the crisis. Therefore, the Federal Council wishes to require additional capital requirements for emergency cases for Swiss parent companies of the UBS and CS – although these parent companies are not formally systematically significant. But resistance is important. The Federal Council therefore postponed the matter for the first half of 2019 and announced its decisions.

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