The Swiss government proposed measures to curb risk-taking at UBS AG and Credit Suisse Group AG as it bids to win parliamentary approval for a tax treaty with the U.S.
"The risks of systemically important banks should be restricted, as more stringent capital, liquidity and risk diversification requirements will be set out," the government said Wednesday. The laws, based on proposals last month by a government-appointed panel, could be in force as of January 2012.
Switzerland needs parliament to support a treaty that could disclose data on as many as 4,450 UBS account holders to U.S. tax authorities. An agreement brokered to protect the bank from a lawsuit in the U.S. was jeopardized when a Swiss court in January ruled it is not fully enforceable.
Switzerland's Social Democrats, who have enough votes to block the UBS treaty in parliament, are linking their support to stricter bank regulation and measures to curb bankers' bonuses.
The measures are intended to prevent another state-sponsored bank bailout after the government invested 6 billion francs ($5.4 billion) in UBS in 2008.
The government favors changes in taxation to discourage "inappropriate" compensation at the banks. The government plans to make banks pay corporate tax on compensation that exceeds 2 million francs and get rid of tax rebates that currently apply to stock option awards.
The proposals Wednesday follow the preliminary recommendations of a panel that on April 22 presented measures on the "too big to fail" question.
The 140 member panel consists of regulators, academics and bank executives.
Banks may sell debt instruments that bolster equity when agreed events happen, the panel said. Lenders' units that are relevant to the Swiss economy should be designed in a way that they can be separated from the company in case of a crisis, allowing other units to go under.
Switzerland's parliament could vote on the proposed measures during its next session, which begins May 31.