Swiss regulator instructs banks to keep an 800% risk buffer for crypto capital

posted 8 months ago
The Swiss Financial Market Supervisory Authority has instructed banks dealing in cryptoassets to apply a risk weighting of eight times their market value when calculating loss-absorbing capital buffers. FINMA wants financial institutions to treat cryptocurrency as a high risk asset class, with a risk weighting touching the upper end of the scale indicating high volatility.

The regulator wrote “[Cryptoassets should be] assigned a flat risk weight of 800% to cover market and credit risks, regardless of whether the positions are held in the banking or trading book”. Under the new regulatory provisions, Bitcoin currently trades at around $6,400, & a bank must value it at eight times that amount, or over $50,000 when calculating the risk-weighted worth of its assets. As a result, banks must reserve a larger amount of capital to cover trading losses for cryptoassets compared to other asset classes.
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