Assessment process for banks’ resolvability

FINMA must take the actions stipulated by law if a crisis breaks out at a bank. In order not to jeopardise financial stability during the institution’s recovery or resolution, the conditions for resolvability must be met. FINMA regularly assesses the resolvability of the systemically important Swiss banks.

Resolvability means creating the conditions for successfully restructuring a systemically important bank in a crisis, or allowing it to exit the market by way of bankruptcy, without jeopardising financial stability. The resolvability of the global systemically important banks (G-SIBs) is assessed regularly by means of the following processes:

  • The FSB’s Resolvability Assessment Process (RAP)
  • The rebate process
  • Operationalising the resolution plan

The current assessment of the resolvability of the systemically important Swiss banks is set out in section III. The processes involved in the assessment are discussed in more detail below.

The FSB Resolvability Assessment Process

As the main international forum, the Financial Stability Board (FSB) has established the Resolvability Assessment Process (RAP) under which the competent national authorities in the FSB member states assess the resolvability of their G-SIBs every year. FINMA carries out this resolvability assessment in consultation with the most important host supervisory authorities for the Swiss G-SIBs. FINMA reports annually to the FSB chair on the progress made over the previous year and the remaining obstacles to achieving resolvability. Based on these reports, the FSB produces a summary of the resolvability status of all G-SIBs.

The rebate system

The Swiss too-big-to-fail (TBTF) legislation contains an incentive system under which the two large Swiss banks are eligible for rebates on their gone concern capital requirements in return for improvements to their global resolvability. These rebates are only granted on the gone concern requirements for the group and parent companies and have no impact on the gone concern requirements of the Swiss entities (UBS Switzerland AG and Credit Suisse (Schweiz) AG). Nor are rebates offered on the going concern requirements (see “Capital requirements for systemically important banks”).

FINMA has evaluated the rebate eligibility of the large banks annually since 2016 on the basis of the measures implemented by them. Only measures that go beyond the statutory minimum requirements are eligible for a rebate.

FINMA is required to consult the SNB during its evaluation. It can also consult foreign supervisory and resolution authorities.

Assessment of resolvability in the global resolution plan

The global resolution plan sets out how FINMA would carry out the restructuring or wind-down of a bank if circumstances required. When assessing the resolvability of the large Swiss banks, FINMA considers whether the banks have made the necessary preparations to ensure the successful implementation of the plan. For this purpose it has broken down the key requirements into four topic areas based on the international standards drawn up by the Financial Stability Board (FSB). They are largely the same as the criteria used in the RAP and the rebate process and thus ensure consistency and the alignment of incentives. The first three areas relate to the disentanglement of interdependencies within the group as well as the reduction of external interdependencies, e.g. in relation to financial market infrastructures. The group as a whole and the individual entities within it should not be put at risk by the failure of an individual subsidiary or third party. The fourth area focuses on the question of the operational capabilities the bank must possess in order to adequately support FINMA’s resolution plan.

Rabattkategorien Banken

The current state of affairs with regard to resolvability in the context of the global resolution plan can be found in the Resolution report 2021.