The stability of Switzerland’s financial system has been improved since the bailout of UBS, the architect of Swiss «to big to fail» rules says. Nevertheless Aymo Brunetti still sees dangers in the country’s financial set-up.
The biggest Swiss bank still has just over a year to present to the financial markets regulator its plans on how to deal with any emergency. If these plans are accepted by Finma, then the maximum has been achieved in securing the financial system, the economist Aymo Brunetti told the new agency «AWP» (in German).
The Swiss government and regulators have since the financial crisis introduced new rules for banks in an attempt to make system-relevant institutions more secure. A repeat of the government bailout of UBS in 2008 should not be allowed to happen again.
«The unavoidable rescue of UBS had shocked me», Brunetti told the agency. At the time he was responsible for economic policy at the State Secretariat for the Economy, and played a significant role in formulating post-crisis regulation of the country’s largest banks.
New Overheating
In reality, it should be possible for a company that is mismanaged to go bankrupt, but that wasn’t an option 10 years ago for the country’s largest financial institution. And now Brunetti sees a new crisis brewing. The «extreme» supply of liquidity by the central banks has led to a bloating of prices in all investment classes, he added.
However the dangers of another banking crisis when this asset bubble eventually bursts is lower than in the past – thanks to the larger bank reserves now in place. Private investors and pension funds will however be the ones to suffer in such a scenario.
