Source: AFP
The IMF urged Switzerland on Thursday to strengthen financial sector regulation as supervision of UBS has become “more challenging” since it grew into a global banking behemoth following its takeover of Credit Suisse.
Switzerland’s biggest bank was boosted by the government to buy Credit Suisse last year amid fears the country’s second-biggest lender could collapse and trigger a global financial crisis.
“Lessons from the CS (Credit Suisse) case should inform further reforms to strengthen the regulatory and supervisory framework,” the IMF said in a statement at the end of its annual staff mission to Switzerland.
Like UBS, Credit Suisse was among 30 international banks deemed too big to fail because of their importance in the global banking architecture.
The merger raised serious concerns in Switzerland about jobs, competition and the size of the resulting bank relative to the Swiss economy.
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“The complexity of the combined bank’s global operations also makes supervision more difficult,” the International Monetary Fund said.
“In the event of a future crisis, previous merger options may no longer be feasible,” IMF mission chief Pelin Berkmen warned at a press conference.
The Washington-based institution noted that UBS is the largest “G-SIB” — global systemically important bank — relative to its home country’s economy.
The IMF said the Swiss financial watchdog’s “powers and resources” should be increased “to enable early and effective intervention” when necessary.
The G20 Financial Stability Board, set up after the 2007-2008 global financial crisis to lead sector reforms, made a similar recommendation in February.
The Swiss Financial Market Supervisory Authority (FINMA) has also called for increased powers to punish bad banks.
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UBS bought Credit Suisse for the bargain price of $3.25 billion.
The bank initially reported a net profit of $29 billion for 2023, but posted a revised figure of $27.8 billion on Thursday after reviewing the deal’s fair value estimate.
The IMF said the Swiss economy “has strong fundamentals” and growth is “expected to recover gradually this year” to 1.3%, followed by 1.4% in 2025.
However, he added that the country faces “several challenges” such as “increasing spending pressures”, future funding gaps in the pension system and vulnerabilities in the real estate sector.
Source: AFP