The euro saw a decline as concerns mount over the financial climate in Europe after a Swiss panel suggested a major rise in reserve capital at UBS AG and Credit Suisse Group AG.
The panel, which was appointed by the government, has forwarded the proposals after analyzing the financial conditions in Switzerland. The Swiss franc appreciated versus the euro amid falls in stocks prices and a sense of prudence in the financial markets of Europe.
The euro, which is used as the sole currency by 16 countries in Europe, saw a six-month high of $1.3807 earlier today before declining to $1.3689 at 8:53 a.m. in New York. The decline was computed at 0.7 percent when compared with its $1.3791 value on Oct. 1. The euro saw 0.6 percent depreciation to 114.06 yen, from 114.78 yen. The yen inched upward at 83.30 per dollar, compared with 83.22 per dollar of its earlier price.
Switzerland has decided to tighten the grip on its two largest banks citing a number of reasons, the major being to avert a financial disaster. The central bank fears that any problems at these banks can result in bankruptcy as they hold five times more capital than the total worth of the Swiss economy.
Under the new rules, the two large banks will be required to hold total capital equal to at least 19 percent of their assets, weighted according to risk. This is almost the double of the 10.5 percent level the Basel Committee on Banking Supervision suggested last month, a meeting that was attended by the global community of bankers.
