SNB welcomes US plans to limit bank risk

Switzerland’s top central banker has welcomed plans by United States President Barack Obama limit the risk-taking of banks.

“The proposal yesterday is certainly something we are extremely interested in,” said Swiss National Bank Chairman Philipp Hildebrand in an interview with the Wall Street Journal published on Friday.

“And, broadly speaking, we are very supportive of making sure certain activities, like prop trading activities, must not be allowed to grow again the way they did or really explode again.”

Obama’s plan prohibits banks from investing in, owning or sponsoring hedge funds or private equity funds and could also bar them from proprietary trading operations for their own profit.

Hildebrand, who took up his post this month, said that it was not acceptable to have “vast, huge risk focused on prop trading – narrowly defined – that has nothing to do with client business but essentially puts the capital of the bank at risk in a highly leveraged manner.” 

Major European countries also offered support for Obama’s plan on Friday but said they had no plans to follow suit.

Mindful of the problems it suffered in 2008, Swiss bank UBS has acted to curb proprietary trading and slash its balance sheet. Competitor Credit Suisse, which did not need state aid in the credit crisis, has nonetheless also moved in this direction.

swissinfo.ch and agencies