On Thursday, the Swiss bank Credit Suisse has developed plans to separate its retail and private banking business in its home market from its investment banking since it poses a risk in the trading operations in Britain and the U.S.
This implementation is known as “ring fencing.” It purpose is to protect the Zurich bank’s retail customers and cover the overall bank from the impact of complications in a single unit in the event of another financial disaster.
Even though Credit Suisse was able to evade the last financial crisis around five years ago due to the government bailout, these are more resilient times the bank is confronted with more stricter capital rule and regulations that are preventing a bank from being labeled “too big to fail” in the near future.
According to nytimes.com, Credit Suisse stated that part of the goal of the newly proclaimed program was to more closely align its investment banking operations to the regions in which they originate. Under this statue that was revealed Thursday, the bank will make a subsidiary for its Swiss-booked business which will include wealth management, retail, corporate and institutional clients in Switzerland.
The redesigning has been approved by the bank’s board and is susceptible to regulatory approval which includes the final approval of the Swiss Financial Market Supervisory Authority better known as Finma. According to the bank, the plan is well in tow and is anticipated to be carried out in the 2015 mid-year.
Due to these changes the bank is less susceptible to fall and better align itself to a firmer regulatory administration. Last month the plan to streamline its investment banking business had involved shifting the fixed-income operations and other businesses it is reducing to a nonstrategic unit within the investment bank. In order to meet Swiss regulatory rules while holding on to their capital resources Credit Suisse had to sacrifice loans and other debt over the last few years. Also within these changes a unit will be created to absorb legal and restructured costs associated with reductions geared towards overseas clients. Included with these costs are expected settlements that are related to tax investment by the U.S.
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