Credit Suisse collapsed because of a massive outflow of client funds. Yet today's bank runs happen silently online, with long lines at counters being a thing of the past. How can regulators and banks prevent them?
Swiss regulators and UBS are looking at possible new instruments that could prevent future bank runs, with current discussions being part of a comprehensive review in the wake of Credit Suisse's collapse, the «Reuters» news service indicated, citing four sources familiar with the matter.
The discussions are part of a comprehensive review of rules pertaining to system-relevant financial institutions. Among the measures being considered are efforts to slow wealthy client asset withdrawals by staggering them over longer periods of time or imposing exit fees, the news agency indicated.
One of the sources indicated to the service that there are also talks about giving clients higher interest rates if they agree to keep their savings at an institution for longer durations.
Testing Too-Big-to-Fail
The discussions are being led by the Swiss National Bank (SNB) and the Federal Department of Finance, with a spokesperson from the latter indicating to the news agency that bank runs are being considered in the context of an overall evaluation of the country's too-big-to-fail framework. The spokesperson said that the government will publish a report on the matter in spring 2024.
«The SNB is contributing to the work», another spokesperson at the country's central bank indicated.
Besides UBS, other system-relevant domestic banks include the Raiffeisen group of banks, Zurich Cantonal Bank, and Postfinance.
Problem Acknowledged
SNB chairman Thomas Jordan floated the idea of outflow containment measures earlier this year in Swiss media, indicating that too-big-to-fail measures should pay heed to the speed of client withdrawals in the belief that not all bank deposits should be withdrawn simultaneously.
A significant proportion of them should be held back by contractual notice periods or time limits, Jordan maintained.
