Swiss bank regulation continues to lead – Fitch

The Swiss National Bank’s pressure on UBS and Credit Suisse Group to reduce leverage and cut dividends proves that the country continues to maintain one of the strictest regulatory frameworks for banks, says Fitch Ratings.

The SNB this week asked the banks to again review their Basel III Common Equity Tier 1 ratios, to better withstand losses. The business challenge for the banks is to meet the higher capitalisation requirements while at the same time reducing their exposure to risk weighted assets.

Fitch’s opinion is that both banks are doing relatively well in meeting their capitalisation requirements.

“Both banks’ credit profiles are supported by their small direct exposure to peripheral Europe and Switzerland’s safe haven status. Their funding and liquidity position is adequate, supported by their dominant wealth management franchises and to a lesser extent their leading Swiss retail and corporate franchises.”

In addition, the Swiss emphasis on tighter regulation is likely to be matched by other regulatory authorities across Europe in future.

“We expect other regulators to close the gap on the SNB and the Swiss Financial Market Supervisory Authority (FINMA) in the coming years,” Fitch said.

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