Extreme capital requirements threaten competitiveness – SBA warns of risks and costs for Switzerland as a financial and business location

During the Credit Suisse crisis, it was not excessively low capital requirements that were the problem but the wide-ranging exemptions to these requirements granted by the supervisory authority FINMA. The lesson to be learned here, therefore, is that such exemptions should be abolished. Instead, however, the Federal Council wants to make the rules on capital backing for foreign participations massively more restrictive, even though this is neither provided for in international standards nor practised by rival financial centres in the US and Europe.

This measure would make it much less attractive to operate international business from Switzerland, which is a vital pillar of the Swiss financial centre’s success and essential to its global standing. Indeed, around half of the approximately CHF 9,300 billion in customer assets managed in Switzerland belong to customers domiciled abroad. To claim that the costs arising from these extreme requirements can be passed on to other countries without any impact on customers in Switzerland would be to ignore the realities of the business. 

With this in mind, the SBA firmly rejects the proposed maximalist capital adequacy requirement. Alternatives exist that are both goal-oriented and proportionate and could be implemented within the context of the overall package of measures. Extreme solutions would affect all of us, with company owners and customers alike paying the price in the form of scarcer and more expensive loans and services. We also need a holistic assessment of the impact of these measures on the real economy. The industry has not yet been consulted on this subject.

The Federal Council recently stated that reducing the regulatory burden was a key element of its economic policy. This must be reflected in its approach to banking regulation. The financial centre and the real economy are inextricably linked, so the focus must be on goal-oriented, proportionate regulation that strengthens competitiveness.

The SBA will now examine the draft on capital requirements for foreign participations in detail and intends to play a constructive role in the process going forward.

More information on banking stability can be found here.