ZURICH, Jan 20 (Reuters) - The Swiss government proposed on Wednesday the complete privatisation of post office bank PostFinance after an initial plan to sell only a minority stake ran into resistance.
The idea is to ease pressure on the systemically important bank by letting it compete in the lending market, at a time when negative Swiss interest rates are weighing on its results.
A sale -- to follow a reorganisation of the post office -- would also gradually inject more competition into the Swiss market for loans and mortgages.
The government in 2018 said it did not envision a complete privatisation of PostFinance, which plays a major role in domestic deposits and payments, but the plan to keep a majority stake drew criticism from both the public and private sectors.
PostFinance's balance sheet here stood at 125.74 billion Swiss francs ($141.19 billion) in 2019, when it had 2.7 million customers. That made it one of the biggest banks in Switzerland by number of customers.
Current law bans it from lending, making it hard for it to offset the impact of negative rates by charging more for loans as rivals like UBS and Credit Suisse can do.
The government said in a statement it planned to amend legislation to let the state support Swiss Post in implementing too-big-to-fail legislation, which requires important banks to hold higher levels of capital.
“Due to their reduced earning power, Swiss Post and PostFinance cannot provide the additional capital required by (bank watchdog) FINMA in full and in a timely manner from their own resources,” it said.
“Therefore, the (state) as the indirect owner is to provide an assurance that it will cover the remaining equity gap in the event of bankruptcy. This assurance should be limited in terms of time and amount and compensated at arm’s length conditions.”
$1 = 0.8906 Swiss francs Reporting by Michael Shields; Editing by Kirsten Donovan
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