The Federal Banking Commission (FBC) has held that preferred
securities issued by fully-consolidated subsidiaries of Swiss
banks qualify as core capital (Tier 1) of the parent bank on a
group level. While in principle the FBC has thus adopted the
requirements set up by the Basle Committee on Banking
Supervision, there are some peculiarities to observe.
The qualification as Tier 1 capital is subject to a
so-called dividend-stopper clause, pursuant to which dividend
payments on the preferred capital of the issuing subsidiaries
will be automatically stopped if the Swiss capital adequacy
requirements applicable to the parent bank on a
non-consolidated or a consolidated basis are no longer met.
The repayment of preferred securities requires, in any case,
the prior approval of the FBC. In addition, the bank has to
disclose in any written public statement regarding its core
capital the portion of preferred securities or other innovative
Tier 1 capital instruments. The FBC underlines the importance
of full transparency regarding the different components of the
capital resources of a bank. The sum of all capital instruments
which are characterized as innovative, in particular preferred
securities, may not exceed 15% of the total Tier 1 risk-based
capital on a consolidated basis.
Finally, the Swiss Admission Board has changed its directive
on debt securities subject to foreign law. Under the modified
directive, securities issued by Swiss and foreign banks or
insurance companies for the sole purpose of creating Tier 1
capital may be listed on the Swiss Exchange even if the
securities are not subject to Swiss law and a Swiss forum.