Switzerland’s Social Democratic Party has drawn up a proposal to shrink UBS’s assets following its takeover of Credit Suisse, reports Aargauer Zeitung newspaper.

The combined bank will have a balance sheet of about 1.5 trillion Swiss francs – about double the size of the Swiss economy, posing huge risks for the country, especially as the bank enjoys an implicit state guarantee, party member and lawmaker Samira Marti told the newspaper.

The left-wing Social Democratic Party, the second largest party in the Swiss parliament, will propose a cap on the bank’s assets, namely that its assets should not exceed half of Swiss GDP, which stood at 771 billion Swiss francs last year.

For the new UBS, this would mean reducing its assets to a quarter of the current level.

“That would be a drastic reduction, but it is necessary from a taxpayer’s point of view,” the newspaper said.

An alternative is to impose higher capital requirements if the bank’s assets exceed 50 per cent of Swiss GDP.

Any part of UBS’s balance sheet above that threshold would require an equity ratio of 30% or more, Marti said of her party’s proposal. Currently, the Swiss parliament is discussing an equity requirement of 15%.

The government-orchestrated rescue of Credit Suisse resulted in 209 billion francs of state and central bank support.

“The goal is for UBS to become smaller,” Marti told the newspaper. “We need to make improvements so that banks are less vulnerable in a crisis.”

About the author: Damien Karlström

The editor-in-chief worked for many years as a literary editor in Bern's leading publications. Over time, I decided to become the editor-in-chief. The main direction of materials is international relations and society.

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