SNB's Jordan: Too Big To Fail Key Issue For Swiss Banks

By Neil MacLucas 

BERN, Switzerland--The key issue for Switzerland's banking industry remains the threat posed to the country's economy by a potential failure of its two biggest banks, UBS AG and Credit Suisse Group AG, Swiss National Bank President Thomas Jordan said Tuesday.

While the risks stemming from the boom in the Swiss real estate and mortgage markets are the present focus of public interest, "the most decisive factor for the long-term importance of the Swiss banking center is the alleviation of the 'too big to fail' issue," Mr. Jordan said in comments prepared for delivery at a business conference.

"Only if this can be done, will it be possible to provide a home to international banks in Switzerland in the long term," he said.

The ongoing regulatory efforts to boost the banks' capital and liquidity positions are making good progress, "however we haven't yet achieved our objective," Mr. Jordan said.

Switzerland's stable political and economic conditions provide an incentive for investment in the country's banks, he said.

Mr. Jordan said that Swiss banks had to assume that traditional bank secrecy in cross-border operations will eventually be replaced by the automatic exchange of tax data between different countries, as proposed by the Organization for Economic Cooperation and Development.

"However, for honest taxpaying customers, protection of privacy and the associated legal certainty remains a legitimate concern, even under the OECD standard," Mr. Jordan said.

The chances of Switzerland, as a small country, being able to host an international banking center will depend on a mix of different kinds of banks, and "both smaller, regional banks and larger, international banks will be needed in future," Mr. Jordan said.

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