The Swiss National Banks expert commission has recommended contingent convertible bonds to be a required portion of bank capital.
BERN, Switzerland—Swiss officials Thursday backed new banking laws to prevent the failure of one or both of Switzerland’s major banks from imperiling the rest of the banking system, but stopped short of calling for UBS AG or Credit Suisse Group AG to be split up.
“Our expert commission concludes that based on our four criteria, the two major banks can clearly be defined as ‘too big to fail’ in their current size and structure,” Swiss National Bank director Thomas Jordan said.
The expert group outlined a raft of measures, including requiring higher capital and liquidity buffers, as well as a “balanced” approach to risk-taking. The government is expected to address the experts’ recommendations as early as next week.
Specific capital measures the commission is backing include having banks issue so-called contingent convertible bonds, which can convert into shareholders’ equity in the event of a bank crisis. Banks must also hold enough liquidity to withstand a period of crisis without outside help, the commission said.
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This is a followup to my original post on contingent convertible bonds.
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