(MENAFN- Kuwait News Agency (KUNA)) The Swiss Ministry of Finance initiated on Thursday a hearing on a Liquidity Ordinance which obligated Banks to manage their liquidity in such a way that they remain solvent even in acute stress situations.
The new provisions are based on the international rules of the Basel Committee on Banking Supervision.
According to a press release issued by the Swiss ministry of finance "Firstly, the rules require that banks manage and monitor their liquidity risks appropriately.
In particular, they are obliged to take organisational measures and hold liquidity buffers consisting of first-class assets that are unencumbered and highly liquid. They must conduct stress tests and establish an emergency concept for liquidity squeezes.
These requirements apply to all banks, whereby the type, scope, complexity and degree of risk of the business activity are taken into account." Secondly, banks are to be given specifications on total and additional liquidity, whereby the ordinance will initially adopt the currently applicable regulations from the Banking Ordinance.
However, according to the international timetable, the provisions should be replaced by the quantitative liquidity standards under Basel III, i.e. replaced by the Liquidity Coverage Ratio (LCR) as of January first, 2015 and by the Net Stable Funding Ratio (NSFR) as of January first, 2018.
Finally, the ordinance contains special quantitative requirements for systemically important banks in order to limit the systemic risks emanating from big banks. In terms of content, they are based on the June 2010 agreement between both Swiss big banks and FINMA on the holding of liquidity. These special provisions apply for systemically important banks instead of the general quantitative liquidity requirements.
In view of the introduction of the LCR and NSFR, banks will be obliged to submit regular reports on their liquidity to FINMA.
The ordinance should enter into force on January first, 2013. The provisions on systemically important banks will enter into force later on, as they still have to be approved by the Federal Assembly as part of the "too big to fail" bill.
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