Basel, 19 December 2005 – The Swiss Bankers Association (SBA) in principle supports the proposed implementation of Basel II in Switzerland. The SBA, however, does have some reservations with regard to the provisional calibration for the revised framework. With regard to the final calibration due at the beginning of 2006 the SBA believes the right balance must be found between securing the advantages of convincing regulation on the one hand, and keeping disadvantages for Swiss banks in international competition to a minimum on the other.

"Basel II" is the name given to the revised capital accord of the Basel Committee on Banking Supervision which stipulates the levels of regulatory capital to be held by banks. "Basel II" is so-called "soft law" and is thus not directly binding but must be implemented through domestic legislation in individual countries. In Switzerland, the basis for legislative implementation is being coordinated by the Swiss Federal Banking Commission (SFBC) through a mixed working group in which the SBA is also represented. At the end of September 2005 the SFBC opened the public consultative process on the draft legislation. Basel II will be put into practice in Switzerland by means of government ordinances and regulatory circulars issued by the SFBC and is due to come into force at the beginning of 2007.

The SBA supports the proposed Swiss implementation of Basel II in principle. Basel II, as well as the proposed translation into Swiss law, both aim to achieve an appropriate differentiation in that banks will have the possibility of choosing from different approaches to determine their regulatory capital requirements (the so-called "Menu Approach").

However, the SBA still has reservations with regard to the provisionally-planned calibration for the revised framework (i.e. the definition of risk weightings and multipliers). The SBA believes the right balance must be found between securing the advantages of convincing and credible regulation on the one hand, while, on the other hand, keeping disadvantages for Swiss banks in international competition to a minimum (the "Level Playing Field" principle). The SBA cannot at present give its final opinion on the calibration issue because the Quantitative Impact Study (QIS) for Switzerland is being conducted at the same time as the consultative process. The SBA will give its corresponding opinion at the appropriate time. From the SBA’s point of view it is especially important to submit the distribution effects of changing over from the status quo to Basel II to careful analysis.

The "two tunnel structure"planned to deal with credit risks (the Swiss Standardised Approach and the International Standardised Approach) constitutes an acceptable solution as it attempts to take the heterogeneity of the Swiss banking sector into account. It is important that calibration guarantees that the two approaches are neutral in terms of competitiveness.

With regard to the planned capital surpluses, the SBA accepts the fact that the SFBC can in special cases demand surplus capital. However, the SBA believes the planned 20% rate for a general, across-the-board surplus is too high and rejects the principle of a quantification of this surplus for political and legal reasons. Any surpluses must be justified with regard to each individual case and must not be fixed at a general level in advance.


Note to journalists
The complete text (German only) of the SBA’s position paper is available on
www.swissbanking.org/Vernehmlassungen, as is a basic explanation of Basel II (from Page 8 of the SBA’s current Annual Report PDF).

Contacts
Thomas Sutter	James Nason
Head of Communications Switzerland	Head of International Communications
Swiss Bankers Association, Basel	Swiss Bankers Association, Basel
Tel. +41 61 295 92 06	Tel. +41 61 295 92 15
Fax +41 61 272 53 82	Fax +41 61 272 53 82
www.swissbanking.org	www.swissbanking.org