Basel III D: Swiss Finish to Basel III

Yale Program on Financial Stability Case Study 2014-1D-V1

10 Pages Posted: 14 Mar 2015

See all articles by Christian McNamara

Christian McNamara

Yale University - Yale Program on Financial Stability

Natalia Tente

Deutsche Bundesbank

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

Date Written: November 1, 2014

Abstract

After the Basel Committee on Banking Supervision (BCBS) introduced the Basel III framework in 2010, individual countries confronted the question of how best to implement the framework given their unique circumstances. Switzerland, with a banking industry that is both heavily concentrated and very large relative to the size of its overall economy, faced a special challenge. It ultimately adopted what is sometimes referred to as the “Swiss Finish” to Basel III – enhanced requirements applicable to Switzerland’s “too-big-to-fail” banks Credit Suisse and UBS that go beyond the base requirements established by the BCBS. Yet the prominent role played by relatively new contingent convertible capital (CoCos) in the Swiss Finish, coupled with the fact that banks are allowed to use their own internal models in determining whether requirements are met may call into question the extent to which the Swiss Finish to Basel III represents a meaningful enhancement to the risk-based capital requirements of the Basel framework.

Keywords: Systemic Risk, Financial Crises, Financial Regulation

JEL Classification: G01, G28

Suggested Citation

McNamara, Christian and Tente, Natalia and Metrick, Andrew, Basel III D: Swiss Finish to Basel III (November 1, 2014). Yale Program on Financial Stability Case Study 2014-1D-V1. Available at SSRN: https://ssrn.com/abstract=2576946 or http://dx.doi.org/10.2139/ssrn.2576946

Christian McNamara

Yale University - Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Natalia Tente

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Andrew Metrick (Contact Author)

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States
(203)-432-3069 (Phone)

HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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