The Swiss Financial Market Supervisory Authority (FINMA) welcomes the dispatch on the revision of the Banking Act, which the Federal Council adopted today. The bill is one of several key measures aimed at strengthening banking stability. In order to achieve the best possible results, FINMA recommends that the measures proposed in the Federal Council’s parameters for amendments to the Banking Act be implemented in their entirety. In particular, it advocates for the strengthening of statutory instruments aimed at prevention.
The Federal Council announced today how it intends to amend the “too big to fail” framework in Switzerland with regard to capital requirements. The Swiss Financial Market Supervisory Authority (FINMA) welcomes the bill adopted by the Federal Council. The fact that foreign subsidiaries of systemically important banks are not fully backed with capital (“double leverage”) has been regarded as a risk internationally for over two decades. In Switzerland, the abolition of double leverage is now being recommended for the second time since 2012. It is up to politicians to weigh up the interests of the bank’s shareholders against the risks to taxpayers.
The planned reforms of the “too big to fail” (TBTF) regulation as a whole are crucial to the future stability and prosperity of Switzerland as a financial centre and, consequently, to the prosperity of our country. However, the bill passed today to strengthen the capital base of systemically important banks is just one of many elements.
Strengthening the law through new preventive measures
In an increasingly complex risk landscape, a strong risk culture and governance, as well as adequate risk coverage in terms of capital and liquidity, are essential for the financial resilience of individual institutions. At the same time, statutory powers that allow the supervisory authority to take preventive action are of central importance.
For three years, FINMA has also been publicly advocating for the strengthening of its statutory instruments, as included and recommended in both the Federal Council’s TBTF report and the Parliamentary Investigation Committee (PInC) report. In particular, FINMA supports the introduction of an accountability regime, the authority to impose fines, and the statutory power to communicate more actively with the public about concluded proceedings and to intervene at an early stage.
The lessons from the Credit Suisse crisis will have been learnt once the law has been strengthened by these liberal and preventive measures. FINMA therefore considers it essential that the measures proposed in the Federal Council’s parameters for amendments to the Banking Act are implemented in their entirety.
