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Credit Suisse and UBS told to raise more capital

2010-10-04 08:16:05

Logos of UBS and Credit Suisse on buildings in Geneva The capital demands reflect the size of the two banks

A Swiss commission has told banking giants Credit Suisse and UBS to raise more capital because they are "too big to fail".

The two must raise their common equity ratio - which measures their ability to absorb losses on investments - to 10%.

It is higher than a new international requirement of 7%, although the banks have been given until 2018 to comply.

The two banks together have liabilities that are more than four times the Swiss economy's entire annual output.

The Swiss authorities are also demanding that the total capital ratio of the banks - a broader measure that includes debts that can be converted into capital - be raised to 19%.

Again, this is much higher than the international standard agreed by the Basel committee of central bankers, which sets the bar at only 10.5%.

The higher levels insisted on by Switzerland reflect the sheer enormity of the two banks - the failure of either of which could cause a crisis for the global financial system, akin to the failure of Lehman Brothers in 2008.

The Basel committee has also said that it will set higher international standards for lenders that are deemed "too big to fail".

However, the details are still being hammered out between its member countries.