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December 22, 2017

FINMA proposed updates to the banking circulars on credit risk (Circular 2017/7) and leverage ratio (Circular 2015/3), with the aim to reflect the amended Capital Adequacy Ordinance. The consultation period for the proposed changes to these circulars will end on February 15, 2018.

The Federal Council, on November 22, 2017, amended the Capital Adequacy Ordinance to permit banks to apply the current exposure method for derivatives and the present rules governing capital adequacy for investments in funds for a further two years. This amendment necessitates a change to Circular 2017/7 for the calculation of the minimum capital requirement for the default fund of a central counterparty. The amended Capital Adequacy Ordinance also requires all institutions to maintain a 3% minimum leverage ratio on tier 1 capital, effective January 01, 2018. The proposed updates to Circular 2015/3 allow banks to also apply the Basel III standard approach for derivatives when calculating the leverage ratio; these proposed changes are in response to the concerns raised by the industry.

 

Related Link: Press Release

 

Comment Due Date: February 15, 2018

Keywords: Europe, Switzerland, Banking, Credit Risk, Leverage Ratio, Capital Adequacy Ordinance, FINMA

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