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Swiss National Bank also wants greater transparency |
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In its latest Financial Stability Report, the Swiss National Bank called for higher capital and liquidity requirements as well as improved transparency and risk management.
In presenting the report, the Vice-chairman, Philipp Hildebrand emphasized the urgency of increasing resilience to financial system shocks for Switzerland. He stated that the best insurance against the unacceptable risk of failure for a big bank is to have a capital base far in excess of the international minimum requirement. One possible method that could be adopted would be by using an appropriate multiplier to increase capital requirements under Basel II, Hildebrand said. In addition, the introduction of a floor for the capital-to-assets ratio would represent a suitable instrument supplementing risk-weighted regulations.
Hildebrand said the advantage of a capital-to-assets ratio is that it guarantees a minimum buffer which is in proportion with the size of the bank. To make the financial system more resilient to shocks means that the size of capital and liquidity buffer in the system has to be increased.
Hildebrand also wanted banks to take more responsibility for transparency stating that greater transparency is required to ensure trust between financial institutions. Banks must also play their part in strengthening future stability of the financial system, Hildebrand said. He wanted banks to put more emphasis on risk indicators pointing to stress situations when publishing their financial reports. The sentiment expressed by the SNB is similar to that expressed by Eric Knight as detailed in our article “Knight Vinke wants greater transparency”.
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