On Apr. 10, SWI GVT wants to close gaps in too-big-to-fail framework.
SWI GVT published report entitled Federal Council report on banking stability including an evaluation in accordance with article 52 of the Banking Act, re too-big-to-fail rules.
Follows SWI PRL Feb. 2024 updated on inquiry following Credit Suisse crisis, #172761.
Report Findings
SWI GVT carried out an in-depth assessment of the systemically important banks' reg.
The comprehensive review of the Credit Suisse crisis showed that the existing too-big-to-fail framework must be strengthened, to reduce risks for the economy, the state.
SWI GVT also issued Q&A on the report and three too-big-to-fail factsheets, regarding bonuses, capital, liquidity explaining the framework and SWI GVT's recommendations.
The Federal Council is proposing, in the report, a broad package of measures for this.
Implementation should also consider SWI PRL Investigation Committee's findings.
SWI GVT's report is proposing a package of 22 measures for direct implementation, with a view to strengthening and further developing the too-big-to-fail framework.
Implementation of the package should reduce the likelihood that another Swiss SIFI will experience a severe crisis and that emergency state measures will be necessary.
In case of a crisis, the resolvability of a systemically important bank as a credible option should be ensured, to minimize the risks, costs for the state and the economy.
There should be a targeted introduction of the proposed measures, in part specifically for UBS as the sole remaining global systemically important bank in Switzerland.
Certain measures also apply to other banks and financial institutions, in areas where limiting them only to systemically important banks would have been inappropriate.
The proposed measures are in line with international regulations and instruments.
At the same time, they take account of the specific circumstances in Switzerland as a major financial center with UBS as the only global systemically important bank.
The Federal Council's package of measures in the report, is divided into 3 focus areas.
Strengthening Prevention
Explicit regulatory requirements and an expanded SWI FINMA toolkit should be used to impose good corporate governance, more accountable risk management for SIFIs.
Including a senior managers' framework with clear allocation of responsibilities and rules on bonuses e.g. retention periods, clawbacks; SWI FINMA should impose fines.
Quantitative, qualitative capital requirements for systemically important banks should be tightened in a targeted way and supplemented with a forward-looking component.
SWI FINMA's options and duties regarding early intervention should be expanded.
Strengthening Liquidity
The potential for liquidity provision by the SWI CB should be significantly expanded.
Furthermore, the possibility of a public liquidity backstop as part of a potential restructuring of a systemically important bank should be enshrined in ordinary law.
Crisis Toolkit
To strengthen resolvability, resolution planning should be expanded, implementation legal risks should be reduced; better authorities' crisis organization and cooperation.
Next Steps
As part of the further work on implementing the proposed measures, the Federal Council will also take account of the findings of the SWI PRL Investigation Committee.
Amendments to ordinances are to be made; these can be approved by SWI GVT.
Then, amendments at legislative level are to be drawn up and submitted to SWI PRL.
SWI SBA Comment
SWI SBA made a statement on the report and welcomed recommendations to close the gaps in Swiss regulations in the areas of liquidity provision, personal responsibility.
However, for SWI SBA, the report lacks a clear focus and, with over 20 measures, risks going overboard, triggering an over-regulation that would harm the national economy.
It proposed a prioritization between the report's measures, based on effectiveness.
The focus should be on expanding the liquidity supply for all banks through SWI CB.
By introducing the public liquidity backstop for systemically important banks, as well as targeted adjustments in the areas of remuneration and responsibility for managers.
Proportionality must be ensured; individual measures' scope must be narrowed down.
For SWI to remain competitive, all measures must be coordinated internationally.
The cost-benefit ratio must be considered when prioritizing, designing the measures.
SWI SBA is committed to targeted and moderate regulation that considers the size, complexity, system relevance and business model of banks, thus ensuring stability.
In May 2024 SWI CDBF welcomed bank stability report but is too vague, see #210940.
In Jun. 2025, SWI GVT opened consultation, announced upcoming drafts, #257721.
