SWITZERLAND’S CENTRAL BANK has said that the country’s banking regulations needed toughening up after the implosion of Credit Suisse, which could have “easily” caused a global financial crisis.
European stock markets plummeted in March in the wake of the high-profile collapse of Silicon Valley Bank and two others in the US.
Following the collapse of the three American institutions, Credit Suisse’s share price plunged on 15 March causing the Swiss central bank to step in with a $54-billion lifeline for the country’s second-biggest bank.
However, investor confidence continued to fall and the UBS, the biggest bank in the country, was pushed into a $3.25-billion takeover on 19 March.
Now, Swiss National Bank chairman Thomas Jordan told shareholders at the Swiss National Bank’s ordinary general meeting that “banking regulation and supervision will have to be reviewed in light of recent events”.
“In the future, regulations will have to compel banks to hold sufficient assets which they can pledge or transfer at any time without restriction, and which they can thus deliver as collateral to existing liquidity facilities,” Jordan said.
The collapse of Credit Suisse would have sent a shockwave through the global financial system. The consequences for the real economy, both in Switzerland and abroad, would have been dramatic.
“A global financial and economic crisis could easily have been set in motion.”
In Switzerland, the merger has raised serious concerns not only about job losses but also for domestic banking competition, especially for loans to small and medium enterprises.
Jordan insisted that the SNB would make sure competition issues were properly taken into account.
“It is important that Swiss households and businesses continue to benefit from a broad range of efficiently priced banking services,” he said.
“For our monetary policy to transmit to the entire economy, interest rates on bank deposits and bank loans must respond swiftly, and strongly enough, to changes in our policy rate. The greater the competition among the banks, the more likely it is that this will occur.”
Inflation in Switzerland was at 3.2% in the first quarter of 2023.
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