Focus on domestic systemically important banks

The domestic systemically important banks all considerably improved their emergency plans compared with 2019 and all have for the first time credible resolution strategies. The measures to recapitalise and continue the banking business of Zürcher Kantonalbank, Raiffeisen and PostFinance differ on a number of points and there are still gaps in implementation.

Recapitalisation and continuity of business activities is the primary strategy of the domestic systemically important banks if they were to be at risk of insolvency. In order to achieve this the three banks have to build up gone-concern funds, i.e. reserve additional capital for recapitalisation. The domestically focused banks are planning to meet this requirement at least partly by reserving CET1 and AT1 capital for a crisis.


The resolution strategies of Zürcher Kantonalbank, Raiffeisen and PostFinance are each slightly different:


Raiffeisen Group’s primary resolution strategy to recapitalise and continue the banking business is influenced by its unique cooperative structure. In the absence of additional measures, FINMA would have to restructure all 224 independent Raiffeisen banks separately if the group was at risk of bankruptcy. To avoid this FINMA has powers to merge the Raiffeisen banks into a single entity and resolve the whole group in one procedure. If losses are to be imposed on bondholders via a bail-in, the merged resolution entity could additionally be converted into another legal structure. FINMA’s current powers in this regard are to be explicitly inserted into the Banking Act.


Raiffeisen has not yet set aside all of the gone concern funds required for recapitalisation in a crisis, which is why FINMA has not yet approved its emergency plan as ready to implement. However, the group has presented a plausible plan on how it intends to close this gap within the required timeline. In addition it issued bail-in bonds in 2020. Thus it has additional loss-bearing funds available in the event of resolution.

Zürcher Kantonalbank

At Zürcher Kantonalbank (ZKB), the canton of Zurich is sole proprietor and liable for all of the bank’s non-subordinated liabilities if the bank’s own resources are insufficient. The canton would therefore be the primary source of funds to recapitalise the bank in a crisis situation. The emergency plan determines the level of funds required to adequately recapitalise ZKB if the bank was facing a crisis. In order for the emergency plan to be approved as effective, ZKB must set aside at least half of these funds in advance using the capital instruments stipulated in the Capital Adequacy Ordinance. Unutilized endowment capital reserves are eligible for this. The other half is deemed to be available based on the public guarantee from the canton of Zurich.


ZKB has not set aside all of the gone concern funds required for recapitalisation in a crisis yet and thus its emergency plan has not yet been approved by FINMA as effective. However, the bank has presented a plausible plan on how this shortfall will be made up within a reasonable timeframe. The exact way in which this will be achieved still needs to be established. Relevant in this regard is also the question as to what extent the legal basis regarding the use of bail-in debt instruments for cantonal banks with a state guarantee will be adjusted in the forthcoming revision of the Banking Act. The bank has also set out the additional measures the canton could take to support a recapitalisation.


Like Raiffeisen and ZKB, PostFinance proposes to carry on the bank’s business in a crisis through recapitalisation. However, to date the bank has been unable to demonstrate how it would raise the necessary funds within a reasonable timeframe either on its own or with the help of its proprietor Post AG. In January 2021 the Federal Council proposed that the Swiss Confederation, in its role as the indirect owner of PostFinance, should temporarily provide sufficient funding to cover the capital shortfall in the event of a resolution. The legal basis would be created by a revision of the Postal Organisation Act, with the capital guarantee being limited to a maximum of 10 years. This proposed federal guarantee means that PostFinance now also has a plausible resolution strategy. However, the emergency plan cannot be deemed to be effective until the guarantee enters into force.


The bank also reduced its operational interdependencies compared with last year. On the other hand, more work is needed on the bank’s alternative resolution strategy.

Finally, all three domestically focused banks meet the special liquidity requirements defined by FINMA for a credible emergency plan and have closed gaps with regard to operational dependencies, specifically in the area of access to financial market infrastructures.