Swiss to guarantee bank deposits up to $86,000

BERN, Switzerland - The Swiss government proposed Wednesday to raise the state-required guarantee for bank deposits to 100,000 Swiss francs ($86,000) from the current 30,000 francs ($26,000).

If approved by the Swiss parliament, the threshold would be higher than the 50,000 euros ($64,000) minimum recently agreed by the European Union to increase confidence in the crisis-hit banking sector.

Switzerland, which is not a member of the 27-nation EU, would increase the overall amount set aside by banks to safeguard deposits to 6 billion francs ($5.14 billion) from currently 4 billion francs ($3.42 billion), the Federal Finance Department said.

The Finance Department said the measures are intended to stop the Swiss economy from being paralyzed by a banking crash.

Switzerland's biggest bank, UBS AG, last month asked the government for help because of liquidity problems and received a $60 billion bailout package. UBS had suffered losses and writedowns of more than 45 billion francs ($40 billion) over the past year.

On Tuesday, the Zurich-based bank reported its first small profit after four consecutive quarterly losses.

Finance Minister Hans-Rudolf Merz said the bailout of UBS should be seen as an exceptional event made necessary by the bank's importance to the Swiss economy.

Switzerland also intends to impose stricter capital requirements on its two biggest banks, UBS and Credit Suisse Group, and take measures to curb executive pay excesses.

The two banks will have to build up additional reserves to match all risk-weighted assets, and abide by a debt-to-assets ratio of 3-4 percent. New rules on management salaries and bonuses will be announced later.

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