Swiss Authorities and Banks Discuss Measures to Prevent Future Bank Runs

Swiss regulators, top-tier banks, and key financial stakeholders, including UBS, are analyzing diverse approaches to prevent bank runs, triggered by the turbulent episode of Credit Suisse earlier this year, according four inside sources. The ongoing confidential talks and review of banking protocols are primarily aimed at top-tier Swiss banks, potentially impacting billions in deposits.

One alternative under contemplation is to proportionately extend withdrawal times to decrease short-term outflows, as per a source. Another possibility being discussed by the attendees involves the introduction of fees for significant fund exits.

Increase reward incentives in the form of higher interest rates for clients willing to lock their savings for extended periods is also under debate.

The discussions are still nascent, with the Swiss National Bank (SNB) and Swiss finance ministry deeply involved in the deliberations, as shared by one of the sources.

The issue of bank runs is being scrutinized as a part of the comprehensive evaluation of the too-big-to-fail regulatory framework in Switzerland, informs a representative from the finance ministry. The Swiss government is expected to disclose a detailed report in spring of the following year, he adds. The SNB confirmed the review process but refrained from further comments on the ongoing work.

Earlier this year, Credit Suisse experienced massive outflows that brought it close to a disorganized wind-down. The bank's precarious condition prompted SNB's intervention with emergency funding and facilitating its buyout by UBS.

The eventual measures decided could either impede Swiss banks' competitiveness or in a worst-case scenario, incite clients to withdraw funds preemptively, warns an insider.