Swiss banks are enlarging their safeguards beyond the BASEL III accord to restore the clients’ faith in private banking. In response to the financial crisis, new capital rules were introduced, forcing banks to hold up to 7% risk-adjusted assets, but this won’t do the trick for historically safe Switzerland. Swiss banks add an additional 3%, augmented with another 9% of contingent convertible bonds (CoCo bonds), equaling a total buffer of 19%, not extraordinary compared to the losses caused by the financial crisis. These requirements will not be limited to Switzerland, this is an evolution to be expected in all large global firms; the combination of core capital and a percentage of debts, convertible into equity. (Source: The Economist)
Rémi Wildschut
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