Systemically important financial market infrastructures

FINMA is responsible for approving recovery plans and drawing up resolution plans for systemically important financial market infrastructures (FMIs) under its supervision.

Systemically important FMIs supervised by FINMA are subject to the statutory rules on recovery and resolution planning (RRP). The aim of these plans is to stabilise these FMIs quickly in the event of a crisis, to restructure them or to lead them into an orderly market exit. This is designed to avoid adverse effects on financial stability or taxpayers.

Systemically important Swiss financial market infrastructures

FMIs are systemically important if they can give rise to risks to financial stability. Designating an FMI as systemically important and identifying its systemically important business processes is the responsibility of the Swiss National Bank (SNB) on the basis of the criteria defined in the Financial Market Infrastructure Act. The SNB must consult FINMA in advance.

The following domestic FMIs have been designated as systemically important by the SNB:

  • the central counterparty SIX x-clear
  • the central custodian SIX SIS
  • the SIC payment system

FINMA is responsible for the supervision and recovery and resolution planning of the first two of these. The SIC payment system is operated by SIX Interbank Clearing on the SNB’s behalf and thus falls within the SNB’s sole responsibility.

Special statutory requirements

Systemically important FMIs already have to meet special requirements in the course of their regular operations to mitigate risks to the stability of the financial system. These requirements are laid out in the National Bank Ordinance and the SNB monitors compliance. In addition, systemically important FMIs supervised by FINMA are subject to the rules on recovery and resolution planning in the Financial Market Infrastructure Act and the Financial Market Infrastructure Ordinance.

The Swiss legislation implements the requirements of the two international standard-setters in this area. These are the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) with regard to recovery planning and the Financial Stability Board (FSB) in resolution planning.

Recovery planning

Systemically important FMIs must set out in a recovery plan the measures they would take to restore stability in the event of a crisis, so allowing them to continue their systemically important business processes. The plan must include a description of the actions to be taken and the resources required for their implementation.

The rules and standards of foreign supervisory authorities and central banks also need to be taken into account. These include in particular CPMI-IOSCO’s Principles for Financial Market Infrastructures, including the associated recovery guidance. FMIs’ recovery plans must show how even very high losses and temporarily elevated liquidity needs could be covered in a number of significant stress scenarios. The aim of the plans is to prevent the occurrence of a resolution scenario by taking forward-looking and preventive action.

The plan must be submitted to FINMA for review and evaluation every year. FINMA decides whether to approve the recovery plan after consulting the SNB. The recovery plans of FMIs are seen as having a similar importance as the emergency plans of systemically important banks.

Resolution planning

FINMA prepares a resolution plan to take effect if a recovery of the systemically important FMI fails. Unlike systemically important banks, FMIs are not required to produce a separate emergency plan. Instead, this forms part of the resolution plan drawn up by FINMA. The resolution plan shows how FINMA would restructure or wind down the systemically important financial market infrastructure if needed. FINMA must consult the SNB on the resolution plan.

The FMIs are obliged to provide FINMA with the information needed to prepare the resolution plan. They must implement measures contained in FINMA’s resolution plan in advance if required to ensure a continuation of systemically important business processes without interruption.