SBA Position Paper on President Obama's proposals for regulatory reforms ("the Volcker rule")

  • The SBA recognises the necessity of strengthening the financial system. Many proposals for reform are currently being discussed at international level and coordinated via the Financial Stability Board (FSB). The SBA welcoes this international coordination and, in particular, the fact that Switzerland is actively involved in the process.
  • However, any measures must be carefully evaluated and analysed. In particular the advantages and disadvantages of any reform measures must be carefully examined.
  • Universal banking is firmly anchored in Switzerland and has proved its worth. It has made an important contribution to establishing Switzerland’s position as a strong financial and industrial centre.
  • Proprietary trading performs important functions in the market (treasury functions, maintaining liquidity, market information, etc.) Forbidding proprietary trading would be counterproductive. In any case it is impossible to draw a sharp demarcation line between proprietary trading and trading commissioned by clients. It is also not possible to demarcate between risky and less risky trading. In any case there has been a sharp reduction in the volume of proprietary trading as a result of the financial crisis.
  • Regulatory authorities should have the power to restrict proprietary trading activities for example by using risk-oriented capital requirements.
  • President Obama’s proposals mark a relapse back towards Glass-Steagall (1933 US legislation that split investment from commercial banking). Indeed, they are even more far-reaching that the Glass Steagall Act was at its time. The recent financial crisis demonstrated that investment banking can be of systemic relevance. On the other hand even Glass-Steagall was not able to prevent the US Savings and Loan crisis of 20 years ago.

Switzerland has already implemented comparatively strict regulatory measures, for example the leverage ratio for the two major banks (UBS and Credit Suisse), stricter capital requirements or rules governing remunerations Systems.