|Swiss Banks Given Tougher Liquidity Requirements|
Switzerland’s Federal Council has recently issued new liquidity requirements for banks in the form of an ordinance.
As a result, banks must at all times have sufficient liquidity to be able to meet their payment obligations even in crisis situations. Moreover, the supplementary requirements for systemically important banks will serve to ensure the financial center's systemic stability.
The Swiss Federal Department of Finance (FDF) explains: "Banks will have to have sufficient liquidity reserves in the future. The new Liquidity Ordinance requires appropriate management and monitoring of liquidity risks. In particular, banks must carry out stress tests and prepare an emergency concept for liquidity shortages."
The FDF adds: "The liquidity management requirements apply to all banks, but they are tiered according to the type, scope, complexity and degree of risk of the business activity. The ordinance also governs the quantitative requirements concerning the liquidity to be held. Initially, these will be taken over directly from the Banking Ordinance, and should be supplemented with the quantitative liquidity standards under Basel III at a later stage according to the international timetable."
"Finally," the department explains, "the ordinance contains supplementary requirements for systemically important banks. In terms of content, they are based on the currently applicable agreements of June 2010 between the two big banks and FINMA on the holding of liquidity."
The ordinance is to gradually enter into force from January 1, 2013. The supplementary requirements for systemically important banks, as the last part of the "too big to fail" package of measures, will have to be approved beforehand by the Federal Assembly.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on December 10, 201