Swiss join UK, U.S. in questioning banks

Over the nearly two years since defaults on U.S. mortgages triggered a banking crisis that spread across the globe, governments have poured trillions of dollars into the financial system to prop up banks and safeguard people's savings.

The International Monetary Fund has called on Europe to make "more convincing efforts" to fix its banks and adopt measures employed in the United States to ensure they have enough capital to weather any repeat of the crisis.

The Swiss National Bank said in its stability report that Switzerland might have to create rules to split off parts of its dominant banks, UBS and Credit Suisse, if the economy worsened. The two hold over $3 trillion (1.84 trillion pounds) in liabilities -- about six times Swiss gross domestic product.

"The state of the Swiss and international financial system is -- and remains -- vulnerable overall," SNB Vice-Chairman Philipp Hildebrand told a news conference in Berne.

"The situation for the big banks appears more difficult. In addition to the still sizeable market risks, they face significant credit risks overall."

The debate over financial regulation has pitted nations against each other but also central bankers against politicians, who do not want to drive bankers from their countries but want to appease anger over taxes being paid to save their jobs.

BRITAIN ROW

In Britain, Bank of England Governor Mervyn King said on Wednesday that banks considered too big to fail may be larger than regulators should allow -- a point swiftly played down by Chancellor, Alistair Darling.

"If some banks are thought to be too big to fail, then, in the words of a distinguished American economist, they are too big," King said in the text of his remarks to the annual Mansion House speech to City of London Financiers.