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Contribution Details

Type Bachelor's Thesis
Scope Discipline-based scholarship
Title The impact of increasing capital requirements on the stock returns of the largest banks in Switzerland
Organization Unit
Authors
  • Adrian Jacob
Supervisors
  • Claire Célérier
Language
  • English
Institution University of Zurich
Faculty Faculty of Economics, Business Administration and Information Technology
Date 2014
Abstract Text In the aftermath of the financial crisis of 2007-2008, governments around the world questioned whether the present regulatory requirements of Basel II are sufficient. In winter 2010, the Basel Committee on Banking Supervision released Basel III as a framework for the international banking regulation to compensate for the weaknesses of previous frameworks. In the meantime, the Federal Council in Switzerland established a Commission of Experts to examine the economic risks posed by systematic relevant companies. Their proposal of solutions to limit the TBTF-problem was followed by several announcements that indicated higher capital requirements for the major banking institutions in Switzerland. This thesis reseraches the impact of such announcements on the stock prices of UBS and Credit Suisse. The findings show no significant abnormal return patterns of the stock prices during the announcement of higher capital requirements in Switzerland. This result corresponds with the M&M propositions. The acceptance of cintingent convertible capital in the regulatory requirements in Switzerland reduces the potential cost for banks. This decision facilitates the transition for the financial institutions into a tighter regulated environment but inherits social cost for the banks benefits in form of tax shield and safety net for the banks.
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