scale, the regulatory reform approach ( basel iii ) sets minimum capital adequacy requirements that are more stringent in both quantitative and qualitative terms, and introduces a global minimum standard on liquidity buffers. at the same time, importantly, the new framework takes explicit account of systemic risk. first, it imposes a capital surcharge for systemically important institutions in order to address the structural tbtf problem. this surcharge amounts to additional loss - absorbing capital of between 1. 0 % and 2. 5 % of riskweighted assets, with the specific requirement depending on the degree to which an institution is systemically important. second, it introduces a countercyclical buffer ranging between 0. 0 % and 2. 5 % of total risk - weighted assets, to increase the system ’ s resilience to cyclical systemic risk. this buffer can be temporarily imposed when credit growth is judged cf. for instance borio, c. ( 2012 ) or schularick, m. and taylor, a. ( 2012 ). bis central bankers ’ speeches excessive. these new rules are being phased in over several years and will come into full effect in 2019. 2 regulation in switzerland : framework and progress so far switzerland is well advanced in the process of introducing a new regulatory approach in line with this international framework. there was, and still is, an urgent need to proceed faster and to go beyond the global minimum standards. first, the size of switzerland ’ s two major banks, credit suisse and ubs, relative to gdp is very large by international standards ( 8 : 1 in 2007 and 4 : 1 today ). it is worth recalling that, back in october 2008, in order to prevent a breakdown of our financial system, the swiss authorities had to take measures to strengthen ubs, putting a large amount of public funds – up to usd 60 billion – at considerable risk. despite the favourable turn of events since then, we have to take all means necessary to avoid such a situation in the future. second, on the cyclical front, the sustained momentum in the swiss mortgage and real estate market over several years has already led to imbalances that pose a risk to financial stability and, ultimately, the swiss economy. so, what have we done to address systemic risk in switzerland up to now? with respect to the structural dimension of systemic risk – the tbtf issue – switzerland already adopted a package of measures back in 2011. this package aims at

reducing both the likelihood of crisis at a systemically important bank and the costs to the economy in the event of such a crisis. the package consists of four complementary measures : ( 1 ) significantly more capital, and capital of better quality, ( 2 ) larger liquidity buffers, ( 3 ) rules imposing sufficient diversification to reduce counterparty risk, and ( 4 ) organisational measures. let me briefly outline some key elements of this package. the new capital adequacy regulations for systemically important banks apply to the riskweighted capital ratio and the leverage ratio. furthermore, they are designed to be progressive. put simply, the bigger the bank, and the greater its systemic importance for the domestic financial system, the higher the requirement. for institutions similar in size to ubs and cs at the time the tbtf package was initially defined, the total capital requirement adds up to 19 % of risk - weighted assets ( rwa ), of which 10 % must be held in common equity and 9 % can be held in convertible capital ( cocos ), and the leverage ratio requirement amounts to about 4. 6 %. 3 the organisational measures require banks to show convincingly – on the basis of “ emergency plans ” – that they are organised in such a way as to be able to maintain systemically important functions in the event of a crisis, thus reducing the need for a public bail - out. if they are not able to do so, the regulator, finma, may impose organisational measures. in march 2012, these new rules came into law and ubs and cs must fully comply by the end of 2018. this transitional period was introduced to mitigate potential unintended side - effects. implementation is under way. specifically, with respect to increasing their risk - weighted capital ratios, both banks have already made substantial progress. if they continue according to the plans they have announced, they will be in a position to fulfil the new regulatory for more detail on the basel iii framework, see bank for international settlements ( 2011 ). for the underlying assumptions and principles, see commission of experts for limiting the economic risks posed by large companies ( 2010 ). bis central bankers ’ speeches requirements by the end of 2014. 4 at the same time, regulators are working on the establishment of resolution and recovery plans. when finalised, these plans should enable the regulators to secure the orderly resolution of a global bank in the event of a severe crisis and, in doing so, to make