ZURICH (Reuters) – International financial authorities must take into account the legal risks surrounding the potential liquidation of global banks, Swiss Finance Minister Karin Keller-Sutter said on Wednesday.
In an interview with the Frankfurter Allgemeine Zeitung newspaper, Keller Sutter was asked whether the rules for dealing with banks deemed “too big to fail” needed to be standardized internationally so that such banks could be liquidated.
Keller Sutter said that she is in contact on this matter with the Financial Stability Board, a body that monitors the global financial system, and other finance ministers, including German Christian Lindner, whom she will meet in Berlin.
She added: “I would like to raise awareness that sometimes liquidation (of a bank) may not be possible due to international legal risks. In the case of Credit Suisse, this was clearly a risk,” referring to the Swiss bank that collapsed. last year.
“There are significant doubts about the success of recapitalization through compulsory creditor participation, that is, a rescue operation,” Keller Sutter said.
“I'm looking primarily at the United States. Big banks invest heavily there. That's why the US supervisory authorities have to approve the liquidation.”
She said that managing these risks is the reason why the Swiss government wants banks connected to the financial system to back their foreign subsidiaries with shares of up to 100%.
“The backing of the foreign subsidiary's shares must be so large that it can be sold or liquidated in the event of a crisis without harming the Swiss parent. This was exactly the problem with Credit Suisse,” she said.
The collapse of Credit Suisse roiled financial markets and led to its takeover by long-term rival UBS, prompting the Swiss government to establish its own measures for entities that are too big to fail in April.
UBS officially acquired Credit Suisse's parent company last week. Rating agency Standard & Poor's on Tuesday revised the outlook for UBS Group AG (NYSE:) to stable from negative, saying that “risks from the group's integration and restructuring have eased.”
