Systemically important banks

Systemically important banks have to meet more rigorous prudential requirements than other institutions. They are also obliged to draw up emergency and recovery plans as a preventive measure. FINMA additionally prepares a resolution plan for these banks. The purpose of these plans is to enable systemically important banks to stabilise themselves in a crisis. If these efforts are unsuccessful, FINMA should restructure the institution successfully or alternatively enable an orderly exit from the market via a liquidation. This avoids adverse effects on financial stability or a de facto government bail-out at taxpayers’ expense.

Criteria for systemic importance

Banks and banking groups are systemically important if their failure would cause significant harm to the Swiss economy and financial system. A bank’s systemic importance depends on its size, interlinkages with the financial system and economy and the substitutability of the services provided by the bank in the short term. The systemically important functions of these banks are first and foremost their domestic deposit-taking, lending and payments business.

 The Swiss National Bank (SNB) is responsible for designating a bank as systemically important.

In line with the international standards published by the Financial Stability Board (FSB), the Swiss regulatory system differentiates between banks with extensive international reach (global systemically important banks/G-SIBs) and those that primarily have a domestic focus (domestic systemically important banks/D-SIBs). The former have to meet even stricter requirements.

Global systemically important banks:

• Credit Suisse
• UBS

Domestic systemically important banks:

• PostFinance
• Raiffeisen
• Zürcher Kantonalbank (ZKB)

The Swiss regulatory framework

The systemically important banks have to meet certain special requirements which are defined in the legislation and whose primary purpose is to strengthen the banks’ resilience. Higher capital and liquidity requirements are designed to mitigate the risk of a bank becoming destabilised in a crisis (see “Capital requirements for systemically important banks”). Moreover, preparations for recovery and resolution need to be made for these banks in “normal” times (see “Recovery and resolution planning for banks”). Finally, both of the large banks organised as international groups must ensure that their systemically important functions in Switzerland could continue uninterrupted if individual entities within the group or the entire group are resolved. FINMA assesses the emergency plans annually to determine whether they are viable (see the current assessment).