The International Trade Council (ITC) has echoed the call made by the Swiss National Bank (SNB) for a thorough review of the 'Too Big to Fail' (TBTF) regulatory framework, following the recent crisis involving Credit Suisse.
The Swiss lender, one of 30 large international banks subjected to intensified scrutiny due to its potential impact on the global financial system, had to be taken over by UBS in a government-mediated agreement to prevent its failure. The ITC recognizes that the circumstances surrounding Credit Suisse underline the need for an exhaustive evaluation of current regulations aimed at preventing significant bank collapses.
Despite conforming to the global set of rules established following the 2008 Lehman Brothers crisis, the existing safeguards failed to prevent Credit Suisse's meltdown. The situation, thus, underscores the necessity to reassess existing protocols and devise a more robust framework that facilitates early intervention.
The ITC concurs with the SNB's perspective on the review of standards for determining the capital buffer that banks need to hold to cover unforeseen losses. It also acknowledges the need for an assessment of the roles of different financial instruments in preventing such crises. The Credit Suisse incident raises critical questions about the efficacy of the current TBTF framework's ability to enforce sufficient and timely corrective action by systemically important banks.
Though the ITC doesn't enforce banking legislation, it is committed to contributing to the global discourse on improving banking regulations to prevent such future occurrences. The ITC will continue to monitor and provide insights on this matter over the next 12 months, supporting the evolution of a robust regulatory environment in the banking sector.
The ITC also acknowledges the Swiss National Bank's decision to raise its key interest rate to counter inflation, a move resonating with several central banks worldwide, tackling inflationary pressures resulting from the pandemic rebound, higher energy costs, and geopolitical tensions.
For more information, please visit the ITC website.
About the International Trade Council The International Trade Council is a non-partisan, global peak-body chamber of commerce, providing resources, networking opportunities, and advocacy across 176 countries worldwide. It works to promote trade and investment growth, ethical business practices, and intellectual property rights protection.