BERLIN (MNI) – Switzerland needs to draw up regulations that allow
for an orderly liquidation of troubled major banks, otherwise the
country would be “extremely vulnerable” in the case of another banking
crisis, Swiss National Bank President Philipp Hildebrand said in the
text of a speech to be delivered Friday.
Hildbrand noted that the major Swiss banks still remain too big too
fail. “The too-big-too-fail problem is grave,” he cautioned. “That is
why the [Swiss] National Bank will resolutely lobby for this problem to
be addressed and defused.”
Currently, the assets of the Swiss banking sector add up to around
seven times the size of the annual Swiss GDP, the SNB President noted.
“In the worst case, it is conceivable that the means necessary to
support [banks in a crisis] could exceed the financial capacity of our
state,” he warned.
Moreover, it hurts market discipline if financial institutions and
their investors know they can count on public aid, Hildebrand argued.
A new financial system must therefore allow for large and systemic
financial institutions that are in trouble to be liquidated in an
“orderly” fashion, the central banker argued. The regulations should
assure that the systemic functions of such banks can continue without
having to rescue the whole enterprise, he explained.
Hildebrand said it would be “irresponsible” for Switzerland to wait
until the necessary regulatory reforms are agreed on a global scale. The
last banking crisis has shown that in the end national authorities are
responsible for stabilizing the banking system, he noted.
A single worldwide set of regulations for an orderly liquidation of
banks is “an unrealistic goal,” the SNB President added. One option
would be a mutual acceptance of comparable national regulations, he
said.
–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com
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