ZURICH, April 8 (Reuters) – Since UBS rescued its stricken rival Credit Suisse a year ago, it has been waiting to hear how authorities will protect Switzerland from the risk of the country’s only remaining big bank also imploding. It is about to find out.
The Swiss government is this month due to publish its recommendations for policing banks that are “too big to fail”, which could saddle UBS with tougher business rules.
In what is expected to be a several hundred-page report, the capital requirement section will be particularly scrutinised, with UBS potentially having to find tens of billions of extra dollars to safeguard against a Credit Suisse-style meltdown.
“Switzerland simply cannot allow UBS to fail,” said Stefan Legge, an economist at the University of St. Gallen. “If it did it would have an absolutely devastating effect on the Swiss economy.”
At around $1.7 trillion, UBS’s balance sheet is double the size of annual Swiss economic output, giving the bank an exceptional weight for a major economy.
Should UBS unravel, there are no local rivals left to absorb it. And the cost of nationalisation could shatter public finances, experts say.
Source: REUTER
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