Swiss financial authorities have urged bank giants UBS and Credit Suisse to quickly improve the quality of their equity capital as fears mount that the Greek debt crisis will spread across the banking sector.

"/> Swiss financial authorities have urged bank giants UBS and Credit Suisse to quickly improve the quality of their equity capital as fears mount that the Greek debt crisis will spread across the banking sector.

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BANK

Swiss banks urged to beef up ahead of crisis

Swiss financial authorities have urged bank giants UBS and Credit Suisse to quickly improve the quality of their equity capital as fears mount that the Greek debt crisis will spread across the banking sector.

The Credit Suisse headquarters in Zurich.
Giorgia Xenakis (File)

A crisis committee will meet this week to discuss the potential impact on Switzerland’s two biggest banks of the eurozone debt crisis, the NZZ am Sonntag newspaper reported on Sunday citing two unnamed sources.

The report said the committee, which was set up after the 2008 bailout of UBS, has got down to work for the first time amid growing concerns of a new financial crisis in the banking sector.

Interviewed by the NZZ, Patrick Raaflaub, director of financial markets regulator FINMA, described the situation in global markets as “tense” but declined to comment on the activities of the committee.

“A body like the financial crisis committee can by definition only function out of the public eye in such phases,” he said, refusing to explain specific measures.

The paper cited one source as saying that while UBS and Credit Suisse were relatively well capitalized, it was not clear how quickly this capital could be mobilized to relieve the impact of a serious crisis spreading through the system.

“In an international comparison, the two banks have an above average amount of capital. But they must further improve the quality of their equity capital,” he told NZZ am Sontag.

“It is no secret that we are encouraging these institutions [UBS and Credit Suisse] to reach their objectives faster than is mandatory,” Raaflaub said.

The committee was formed in 2008 at the request of the country’s parliament after Switzerland came to the rescue of UBS AG during the last financial markets crisis. It is led by Raaflaud and includes the vice chairman of the Swiss National Bank, Thomas Jordan, as well as several high level officials from the finance ministry.

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ECONOMY

Why Switzerland continues to attract foreign companies despite the coronavirus pandemic

Despite the pandemic, 220 foreign businesses set up their offices in Switzerland in 2020.

Why Switzerland continues to attract foreign companies despite the coronavirus pandemic
Switzerland is a magnet for foreign companies. Photo by Valeriano de Domenico/AFP

While this number is 9 percent lower than in the previous year, these companies have created 11 percent more new jobs — a total of 1,168 — than in 2019. Most of the new jobs were created by companies from China, the United States and Germany.

About 3,600 more positions are expected to be offered by these enterprises in the next three years, according to data from SRF, Switzerland’s public broadcaster.

In fact, Switzerland is one of the very few countries that have been able to attract international companies to its shores in 2020, a notoriously bad year for the global economy.

READ MORE: Why Switzerland’s economy is on the up despite the coronavirus pandemic

Experts believe this is due to the country’s strengths, including political, economic and financial conditions.

“Even in a time of crisis, Switzerland scored thanks to its stability, predictability and security”, said Patrik Wermelinger, member of the executive board of Switzerland Global Enterprise (SGE), which promotes the country abroad on behalf of the federal government and the cantons.

There are also other reasons that had prompted foreign companies to come to Switzerland in 2020, despite the economic uncertainty and travel restrictions.

“Protection of legal rights, freedom, and personal responsibility are stronger in Switzerland than in many other countries, even in times of pandemic”, said SGE’s co-president Walter Schönholzer.

Switzerland’s attractiveness is also boosted by studies showing the country’s economy remains the strongest in the world.

Even though the health crisis plunged Switzerland’s economic activity into a “historic” 8.2-percent slump in the second quarter of  2020, the country still boasts the world’s most resilient economy, according to research by an insurance and reinsurance company Swiss Re. 

The International Monetary Fund (IMF) expects a 3.5-percent rebound in Switzerland’s gross domestic product (GDP) in 2021.

It said Switzerland’s economy absorbed the shock of the pandemic better than other European countries and it “has navigated the Covid-19 pandemic well”.

IMF added that Switzerland’s “early, strong, and sustained public health and economic policy response has helped contain the contraction of activity relative to other European countries”.

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