Overview of recovery and resolution

The ongoing work of the systemically important banks on their recovery and emergency plans was the main focus at FINMA in 2018.

The Recovery and Resolution division concentrated on monitoring systemically important banks as they drew up recovery and emergency plans and assessed these plans. The division also gave its first assessment of the recovery plans of the systemically important financial-market infrastructures (FMIs). In addition, FINMA continues to monitor a large number of liquidation and bankruptcy proceedings.

Large banks’ parent companies strengthened

In 2017 FINMA ordered on the basis of Art. 4 para. 3 of the Banking Act that holdings in subsidiaries at the parent companies of the two large banks would in future be counted on a risk-weighted basis when determining the requirements for going concern capital. The relevant amendments to the Capital Adequacy Ordinance (CAO) entered into force on 1 January 2019.

FSB Resolvability Assessment 2018 and capital rebate review

FINMA carried out the annual resolvability assessment process (RAP) in 2018 in line with the recommendations of the Financial Stability Board (FSB). It informed the FSB of progress made in ensuring the resolvability of the two major banks as at the end of 2017 and the remaining obstacles to resolution. Both the assessment of the crisis management colleges and the FSB’s international comparison paint a positive picture of the progress that has been made. FINMA also reviewed the resolvability of the two financial groups against the criteria in the Banking Ordinance for granting rebates on additional loss-absorbing funds (gone concern capital). FINMA granted the two banks an additional rebate, primarily for implementing a global service company structure separate from their banking business. Both of the large banks have thus in total received 40% of the maximum rebate as at the end of 2018. The two banks will implement further improvements in their resolvability in the coming years and FINMA will review annually whether or not to give additional rebates.

Emergency planning for systemically important banks

The two large banks further enhanced and operationalised various aspects of their emergency plans in 2018. Nonetheless, both banks still have a considerable amount of work to do to meet the deadline of the end of 2019 for the completion of a realisable emergency plan, particularly with regard to reducing financial interdependencies within the group and closing liquidity gaps in the event of a crisis.

For the three domestic systemically important banks the main obstacles are the failure of the emergency plans to take account of the requirements for gone concern funds which came into force on 1 January 2019 and the lack of feasible resolution strategies based on these. FINMA was therefore forced to extend the deadline for submitting an implementable emergency plan for all three banks.

International cooperation in recovery and resolution

As the home supervisor of two global systemically important banks, FINMA is responsible for coordinating the cross-border recovery or resolution of these banks with the foreign supervisory authorities in the CMG in the event of a crisis. The prime objective is to avoid an adverse impact on the domestic and global financial system and the economies concerned without having recourse to government support. FINMA organises three meetings annually – two colleges and a workshop – to lay the groundwork with the foreign supervisory authorities for ensuring international cooperation in the event of a crisis.

Recovery and resolution: responsibilities

FINMA’s recovery and resolution activities cover the entire crisis cycle, from prevention and intervention in an acute crisis situation to resolution in cases where no recovery is possible.

 

Zuständigkeiten


(From the annual report 2018)