Swiss banks UBS and Credit Suisse may soon be cut down to size.
Swiss National Bank, the nation’s central bank, says it may force shrinkage upon the banks to curb their risks, unless policymakers around the world figure out a better way to deal with bank failures.
“There can be no more taboos, given our experiences of the last two years,” Philipp Hildebrand, vice-chairman of the Swiss National Bank, tells the Financial Times.
“There are advantages to size ... (But) in the case of the large international banks, the empirical evidence would seem to suggest that these institutions have long exceeded the size needed to make full use of these advantages.”
The institutions have grown in recent years, to the point that they matched their biggest New York and London competitors.
Of course the Swiss banks also suffered big-time from holding toxic assets during the financial meltdown, just like their U.S. and European brethren.
UBS and Credit Suisse suffered billions of dollars of losses during the financial crisis, and last year their collective assets were equivalent to six times Swiss GDP. So the government has reason to be worried.
In the United States, meanwhile, the Obama administration’s financial regulation proposal does little to offset the too-big-to-fail problem, experts say.
“The Obama plan is little more than an attempt to stick some new regulatory fingers into a very leaky financial dam rather than rebuild the dam itself,” Joe Nocera writes in The New York Times.
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