A Swiss government panel proposed rules that would require the nation’s two big banks, UBS and Credit Suisse, to hold more capital in reserve than international competitors as a way to provide extra insurance against a catastrophic failure.

The rules, which require approval by the Swiss parliament, address concerns by the Swiss National Bank and others that a severe crisis at Credit Suisse or UBS could prove more than the nation of 7.8 million people could bear. The two banks’ combined balance sheets are five times the size of the Swiss economy.

“Given their size, it cannot be ruled out that the big Swiss banks are potentially T.B.T.B.R.,” or too big to be rescued, the Commission of Experts said in a report. The commission, which was appointed by the Swiss Federal Council, included representatives of the central bank as well as industry and the two big banks.

Please read more in the Wall Street Journal.

Swiss bank UBS will hire two executives to lead efforts to make more U.S. mortgage loans.

Now maybe I am missing something here, but the U.S. mortgage market is a mess. Despite the epidemic of battered U.S. mortgages, UBS officials say the home-loan business offers an attractive cross-selling opportunity without exposing the company to excessive risk.

In addition, I thought UBS got into trouble in the past due its dealings in the U.S. mortgage market. So perhaps some one can enlighten me as to what UBS plans to accomplish by jumping back into the U.S. mortgage market?

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European regulators painted a rosier-than-expected portrait of the continent's beleaguered banking sector on Friday, provoking criticism that the government's "stress tests" weren't tough enough on banks.

The tests found that 91 banks in 20 European countries could face €566 billion ($730 billion) in total potential losses in a deteriorating economic and financial environment. But only seven banks flunked the tests, coming up short a combined €3.5 billion in capital.

Read more in the Wall Street Journal.

The euro declined against the dollar as investors cast cautious eyes toward European bank stress tests.

More on this story may be found in the Wall Street Journal

Prosecutors in Germany raided 13 offices of Credit Suisse AG on Wednesday as the government searched for evidence that bank employees may have assisted customers in evading taxes.

This news comes amid a broad assault on Swiss bank secrecy and the country's status as a leading tax haven. The German case is the latest in which countries are using bank account data taken by bank employees to initiate investigations.

More on this story may be found in the Wall Street Journal.

HSBC officials allege that Hervé Falciani copied thousands of files of wealthy clients of its Swiss private-banking arm. Swiss authorities are investigating whether Mr. Falciani stole bank records and violated banking secrecy laws.

Mr. Falciani and another HSBC employee - Georgina Mikhael - offered the data to governments and other banks in Europe and the Middle East, according to people familiar with the investigation. It is alleged that he and Ms. Mikhael set up a virtual company, with Mr. Falciani using an alias.

Mr. Falciani admits being in possession of the data and confirms contacting governments about it. But he and Ms. Mikhael both deny breaking any Swiss banking secrecy laws. The emails sent regarding the data didn't ask for money. He says his goal wasn't to profit from the data, but rather to expose secrecy in banking practices.

"I am not a Robin Hood, I'm not a mercenary," Mr. Falciani said in an interview. "I acted like a citizen."

Whatever the case, his leaking of client's data rocked the Swiss banking world!

More details of this fascinating story may be found in the Wall Street Journal.

Wall Street Journal

EU lawmakers have voted to cap bankers' short-term cash bonuses from 2011.

Members of the European Parliament voted 625-28 in favor of the new rules which will become final when they are approved by EU finance ministers as expected next week.

From 2011, bankers will only be able to get part of their yearly bonuses in cash upfront. The other 70% will be held back and paid out if the company performs well.

According to the New York Times editorial, Switzerland Starts to Come Clean, the U.S. Internal Revenue Service (I.R.S.) forgoes about $100 billion a year in uncollected taxes from businesses and wealthy individuals that keep their money in offshore secretive accounts. This is a crime! It has also proved notoriously difficult to stop because of the bank secrecy statutes in tax havens around the world.

Recently the Swiss Parliament’s approval of a deal to give the I.R.S. the names on 4,450 American accounts at UBS is believed to be an important victory. And with international tolerance for this grubby business running out, other tax havens are taking a hard look at their policies.

Here's a follow up to my blog post Swiss Parliament Backs UBS Pact - Finally.

According to Bloomberg , U.S. citizens and residents with UBS accounts are racing the clock to disclose their secret holdings to the IRS after the Swiss Parliament ratified an agreement to surrender the names of 4,450 bank clients.

Lawyers said Americans who ignored an IRS offer last year to reduce penalties in exchange for voluntary disclosures are now flooding their offices with calls seeking advice on how to avoid possible sanctions, which could include prison sentences.

European governments agreed to submit their banks to public "stress tests". The decision by EU leaders overcomes longstanding resistance to disclosure of the results of the "stress tests," which are aimed at demonstrating how well banks would stand up to serious economic shocks.

More details on these bank "stress tests" may be found in the Wall Street Journal .