Switzerland's government said UBS and three other systemically relevant banks must face tougher capital requirements to shield the country's wider economy.
In 209 pages of recommendations on how to police banks deemed "too big to fail" , the Swiss government pitched 22 measures for direct implementation. It stopped short of saying how far stricter capital requirements should go.
The TBTF plan will come under close scrutiny in Switzerland and beyond because if UBS were to unravel, there are no local rivals left that could absorb it. A bailout and nationalisation would likely cause serious damage to public finances. The Swiss government-backed takeover by UBS of Credit Suisse last year was the biggest merger of banks of systemic importance since the 2007-9 financial crisis.
The report floated giving extra powers to Swiss market regulator FINMA, the possibility of applying capital surcharges and strengthening the financial position of subsidiaries, but shied away from a "blanket increase" in capital requirements. The Financial Stability Board, a global financial watchdog, has also cautioned Switzerland about the risks of UBS failing.
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