SWI GVT Banking Stability Report


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.

Regulators SWI GVT; SWI SBA; SWI SECO
Entity Types Bank; BHC; SIFI
Reference FAQ, Rp, PR, 4/10/2024; ESG
Functions Compliance; C-Suite; Exams; Financial; Legal; Market Conduct; Operations; Resolution; Risk; Treasury
Countries Switzerland
Category Central Government; Trade Association
State
Products Banking; Equity
Regions EMEA
Rule Type Concept
Rule Date 4/10/2024
Effective Date 4/10/2024
Rule Id 207882
Linked to Rule :172761
Reg. Last Update 4/10/2024
Report Section EU

Last substantive update on 04/12/2024