Switzerland's market regulator is allowing lenders to exclude their central bank reserves in measuring their leverage ratios as part of government efforts to ease banking regulations so market players can bolster their lending to companies amid the coronavirus outbreak.
The Swiss Financial Market Supervisory Authority, or FINMA, said March 25 that the decision affects roughly CHF20 billion of banks' Tier 1 capital, which could now be lent to companies. The measure will initially take effect until July 1, but this can be extended, the regulator said.
FINMA's announcement comes after the Swiss government unveiled an emergency ordinance on granting credit to small and medium-sized enterprises amid the outbreak. The government's program includes up to CHF500,000 of interest-free emergency loans to companies hit by the pandemic.
To preserve capital, FINMA also recommended that banks take precautions in their dividend policies and suspend share buyback programs due to current market conditions. "Strong institutions who act voluntarily now to restrict distributions will remain stronger for longer," it said.