UPDATE 3-Swiss change bond rules to get liquidity to big banks

Δημοσιεύθηκε: 18 Φεβρουαρίου 2009 - 16:19

By Sven Egenter

ZURICH, Feb 18 (Reuters) - Switzerland unveiled changes to rules on Swiss covered bonds on Wednesday in a move to unfreeze the interbank market by encouraging liquidity to flow from cash-rich regional banks to UBS and Credit Suisse.

This is the latest step the Swiss National Bank and the government have taken to support the Swiss economy and its banking system, including aggressive interest rate cuts, new policy measures and a bailout of the country's largest bank UBS.

The capital rules for the specialised banks allowed to issue so-called Pfandbrief -- bonds backed with Swiss mortgages which meet a strict set of criteria -- would be relaxed, allowing them to issue more bonds, the finance ministry said.

That would support deals like the one the SNB brokered in December last year, the ministry said in a statement.

'The SNB and the banks hope to tap into a volume of around 20 billion Swiss francs this year,' the finance ministry said.

Before Christmas, the SNB brokered a deal between three local banks and UBS. At the time, UBS issued a 2 billion Swiss franc ($1.71 billion) covered bond, which state-owned Zuercher Kantonalbank, Postfinance and cooperative Raiffeisen group underwrote to provide UBS with liquidity.

UBS said it had 117 billion francs' worth of Swiss mortgages on its books at the end of 2007. The 2008 annual report due on March 19 will contain 2008 figures. Credit Suisse said it had more than 100 billion francs' worth of Swiss mortgages on its books at the end of 2008.

INNOVATIVE

ZKB economist David Marmet said the move should help to normalise the interbank market. 'The interbank market is still frozen and liquidity is only distributed via the SNB,' he said. 'The move prepares the ground for the SNB to pull out at some stage.'

The move complemented the central bank's other efforts to support the economy and was unlikely to replace further unconventional easing measures, Marmet said. 'The SNB has been very innovative when it came to use new measures,' he said.

The SNB has taken a series of measures to ease strains on the money market, including longer-term repo operations, foreign exchange swaps and dollar repos.

Ακολουθήστε το Euro2day.gr στο Google News!Παρακολουθήστε τις εξελίξεις με την υπογραφη εγκυρότητας του Euro2day.gr

FOLLOW USΑκολουθήστε τη σελίδα του Euro2day.gr στο Linkedin

The SNB has slashed its target for the 3-month Swiss franc LIBOR aggressively to 0.5 percent and the LIBOR has fallen below the target due to the measures to ease market strains.

SNB board member Thomas Jordan said on Monday that the central bank hoped for another deal in March. 'We hope that this instrument can be used for larger transactions,' Jordan said. The instrument was open to both large banks.

The Swiss Pfandbrief is issued only by Pfandbriefzentrale, owned by the state-owned cantonal banks, and by Pfandbriefbank, owned by the country's commercial banks.

The banks need a percentage of the issue amount as capital on their balance sheets and the current capital base did not allow for more issues, Dina Beti, head of the Swiss finance ministry's legal department said.

'They could have raised capital but we only want a short-term solution to a short-term problem. So they are now allowed to use loans from their shareholders,' she said.

UBS and Credit Suisse are among the owners of Pfandbriefbank, and therefore likely to provide such a loan as well, she said. 'They are getting a huge amount of liquidity for a relatively small loan,' Beti said.

For Factbox on tools to steer liquidity click

For a Factbox on Pfandbrief click on

(Additional reporting by Katie Reid, editing by David Stamp) ($1=1.173 Swiss Franc) Keywords: SWISS BONDS/

(sven-markus.egenter@reuters.com; +41 58 306 7351; Reuters Messaging: sven-markus.egenter.reuters.com@reuters.net)

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.