Featured Product

    FINMA Assesses Recovery and Emergency Plans of Large Swiss Banks

    February 25, 2020

    FINMA published a report that provides detailed assessment of the recovery and resolution plans of the systemically important Swiss institutions. FINMA has approved the recovery plans of all five systemically important Swiss banks. In addition, the two large Swiss banks were required to produce effective emergency plans for their Swiss operations by the end of 2019. FINMA views the Swiss emergency plans of Credit Suisse and UBS as effective and approves them. However, the emergency plans of the three domestic systemically important banks—PostFinance, Raiffeisen, and Zürcher Kantonalbank—do not meet the statutory requirements yet.

    Following the financial crisis of 2007-2008, FINMA promulgated special rules for the stabilization, restructuring, or liquidation of troubled institutions. The rules require higher capital and liquidity buffers as well as plans for recovery and resolution. There are four main instruments in this context:

    • Recovery plan. The systemically important bank or financial market infrastructure sets out how it would stabilize itself in a crisis. This plan requires the approval of FINMA.
    • Swiss emergency plan. In this plan, a systemically important bank details how it would ensure uninterrupted continuity of its systemically important functions in Switzerland (particularly access to deposits and payments) in crisis. FINMA must review this plan and evaluate whether it is ready to be implemented if necessary.
    • Resolution plan. FINMA produces a global resolution plan for Credit Suisse and UBS. This indicates how the entire global group would be recapitalized, restructured, and/or (partially) liquidated in a crisis. Resolution plans are also required for the domestic systemically important banks and systemic financial market infrastructures. FINMA assesses the resolvability of an institution on the basis of whether the preparations of the institution are sufficient to successfully implement the plan if necessary.
    • Rebates. FINMA can grant UBS and Credit Suisse rebates on certain components of the capital requirements if they have made significant improvements in their global resolvability. In 2019, Credit Suisse and UBS utilized 40% and 42.5% of their maximum rebate potential, respectively.

    FINMA regards the emergency plan of Credit Suisse to be effective. UBS has been also judged by FINMA to have met the requirements for an effective emergency plan, with the qualification that certain joint and several liabilities remain excessive. The three domestic systemically important banks also submitted an emergency plan, but were at different stages of implementation at the end of 2019. None of the plans has been deemed to be effective yet. At Zürcher Kantonalbank, there is a plausible plan for how the capital and liquidity resources required in the event of a crisis can be built up further. Raiffeisen and PostFinance do not yet have plausible plans for accumulating the necessary gone-concern funds for recapitalization in a crisis. All three domestic banks have work underway to develop an effective emergency plan. The domestic systemically important banks have little or no foreign business and their resolution plans relate solely to the systemically important functions in Switzerland. They are, therefore, largely interchangeable with the emergency plans.

    FINMA is, however, required to draw up a global resolution plan for the global systemically important banks: Credit Suisse and UBS. Unlike the emergency plan, which relates purely to the systemically important functions of banks in Switzerland, this global resolution plan covers the entire banking group worldwide. FINMA concluded that both the banks already took important preparatory steps and made considerable progress with respect to their global resolvability. FINMA believes the requirements for structural disentanglement are now fulfilled. For instance, the two banks created holding structures and Swiss subsidiaries to facilitate this disentanglement. In other areas, particularly with regard to funding in resolution, further implementation work still needs to be done. 

     

    Related Links

    Keywords: Europe, Switzerland, Banking, Too-Big-To-Fail, Rebates, Recovery and Resolution, G-SIBs, D-SIBs, Systemic Risk, Resolution Framework, FINMA

    Featured Experts
    Related Articles
    News

    BCBS Amends Guidelines on Sound Management of AML/CFT Risks

    BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).

    July 02, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Amendments to Swap Margin Rule

    US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.

    July 01, 2020 WebPage Regulatory News
    News

    PRA Letter Sets Expectations on Approach to Managing Climate Risks

    PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.

    July 01, 2020 WebPage Regulatory News
    News

    EBA Guidelines on Treatment of Structural Foreign Exchange Under CRR

    EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).

    July 01, 2020 WebPage Regulatory News
    News

    FSB Issues Statement on Impact of COVID-19 Crisis on Benchmark Reform

    FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.

    July 01, 2020 WebPage Regulatory News
    News

    IAIS Publishes List of Internationally Active Insurance Groups

    IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.

    July 01, 2020 WebPage Regulatory News
    News

    FED Temporarily Revises FR Y-9C With Respect to PPPLF and CARES Act

    FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).

    July 01, 2020 WebPage Regulatory News
    News

    EC Launches Consultation on Review of Solvency II Directive

    EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.

    July 01, 2020 WebPage Regulatory News
    News

    ECB Consults on Supervisory Approach to Consolidation in Banking

    ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.

    July 01, 2020 WebPage Regulatory News
    News

    IAIS on Package for 2020 Data Collection on ICS and Aggregation Method

    IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.

    June 30, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5425