Switzerland intends to implement the capital adequacy rules of the international Basel III framework for all banks. The Federal Department of Finance FDF is releasing the amended Capital Adequacy Ordinance for consultation, and FINMA is doing likewise with its adapted circulars.
After the 2008/2009 financial crisis there was a general consensus at national and international level that the banking sector needs stricter capital adequacy requirements. Under the leadership of the Basel Committee on Banking Supervision (BCBS), the new Basel III regulatory framework was drawn up during the course of the past three years, requiring banks to hold significantly more equity capital of a better quality with a view to absorbing losses more effectively.
Against this international backdrop, provisions in Switzerland for stocking up banks with equity capital are to be revised, with the international Basel III standards being adopted. The existing Swiss regime with capital buffers going beyond these international minimum standards remains in effect.
The new provisions are to enter into force on 1 January 2013 and, in line with the transitional deadlines of the international regulatory framework, will be fully implemented by the end of 2018. The over 300 banks in Switzerland are affected differently depending on their current capital resources and their diverging business models. The greatest impact will be on the two big banks, for which the draft "too big to fail" regulations that have now been passed by parliament prescribe even more stringent requirements. The FDF will carry out its own consultation in November regarding the resultant changes to the Ordinance.
Almost all Swiss institutions already hold sufficient high-quality equity capital to comply with the implementation in Switzerland of the new international capital adequacy requirements.
Not all the elements of the international Basel III framework will be implemented in this proposed revision of the Capital Adequacy Ordinance and of the relevant FINMA circulars. On the one hand, banks could be obliged to hold additional capital for a variable anti-cyclical buffer aligned with the economic cycle. The banks will have the opportunity to comment on this matter, as well as on the implementation of the stricter risk weightings for residential properties initiated by the Federal Council on 17 August 2011, in a further consultation. On the other hand, the introduction of an unweighted leverage ratio and of new minimum standards for liquidity risks is subject to preventive observation periods to identify any unforeseen effects that may arise. The relevant draft revisions for Swiss banks will follow starting in 2012.
Tobias Lux, Media Spokesperson, phone +41 (0)31 327 91 71, email@example.com