Swiss lawmakers consider linking liquidity backstop fee to capital requirements

By Ariane Luthi

ZURICH (Reuters) - Swiss plans to create a form of safety net for big banks could be delayed as lawmakers consider linking it to requirements to make lenders like UBS hold more capital to make them safer.

On Monday, a parliamentary committee will debate establishing a permanent so-called public liquidity backstop (PLB) and discuss how much banks should contribute to it.

A public liquidity backstop provides cash to lenders in serious trouble, and in 2023 Credit Suisse accessed one via an emergency law before the bank collapsed and was bought by UBS.

Hannes Germann, a member of the Swiss People's Party from the upper house committee scheduled to discuss the PLB, said he wanted to link the payments banks make to the PLB to how much extra capital lenders must hold.

"A link is imperative," Germann told Reuters, saying that if banks hold enough capital they should not need to pay any additional fee to a public backstop.

A second committee member, Eva Herzog of the Social Democrats, also saw the backstop and capital requirements as linked but wanted them discussed together for other reasons.

She said new academic research should be considered before taking a decision on the PLB, including a Bern University study released in January that found UBS benefited from an effective state guarantee worth billions, due to its status as a systemically important bank.

UBS deferred to the Swiss Bankers Association (SBA) when asked for comment. The SBA said it backed the introduction of a PLB but did not see the need for a fee to be imposed on banks.

The demise of Credit Suisse dealt a serious blow to Switzerland's reputation for banking excellence and both measures are part of the government's drive to make its financial system safer while safeguarding competitiveness.

Finance Minister Karin Keller-Sutter last year indicated UBS could have to hold anything up to 25 billion Swiss francs ($27.8 billion) in extra capital under the new rules.

UBS has pushed back, arguing that hefty capital demands would weaken Swiss banking competitiveness. The government is expected to release its proposed capital requirement rules for public consultation in May. The government has proposed making Switzerland's four systemically important banks pay a PLB fee that in 2022 would have been 70 million-210 million Swiss francs ($77 million-$232 million) but the estimate is not final.

"It will probably not stay that way," lawmaker Germann said.

($1 = 0.9006 Swiss francs)

(Reporting by Ariane Luthi; Editing by Dave Graham and Elaine Hardcastle)