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

    Related Articles
    News

    BCBS and IOSCO Propose Further Policy Work on Margining Practices

    Three global standard-setters launched a joint consultation that reviews the margining practices during the COVID-19 pandemic and identifies potential areas for further policy work.

    October 26, 2021 WebPage Regulatory News
    News

    BoE Seeks Information Before Migrating Statistical Reporting to BEEDS

    The Bank of England (BoE) published the Statistical Notice 2021/09 requiring additional information from firms and software vendors to assist in the onboarding and testing phases for migrating statistical reporting to the BEEDS portal.

    October 25, 2021 WebPage Regulatory News
    News

    EBA Finalizes Standards on Alternative SA for Market Risk

    The European Banking Authority (EBA) published the final draft regulatory technical standards on gross jump-to-default amounts and on residual risk add-on under the Capital Requirements Regulation or CRR.

    October 25, 2021 WebPage Regulatory News
    News

    FCA Publishes Final Rules on Investment Firms Prudential Regime

    The Financial Conduct Authority (FCA) published the final rules on the Investment Firms Prudential Regime (IFPR) to streamline and simplify the prudential requirements for solo-regulated UK firms authorized under the Markets in Financial Instruments Directive (MiFID).

    October 25, 2021 WebPage Regulatory News
    News

    ESAs Propose New Rules for Taxonomy-Related Product Disclosures

    The European Supervisory Authorities (ESAs) have delivered to the European Commission (EC) the final report on the draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR).

    October 25, 2021 WebPage Regulatory News
    News

    EBA Advice on Review of Crisis Management/Deposit Insurance Framework

    The European Banking Authority (EBA) published an advice to the European Commission (EC) on funding in resolution and insolvency as part of the review of the crisis management and deposit insurance (CMDI) framework.

    October 25, 2021 WebPage Regulatory News
    News

    FSOC Report Issues Recommendations to Address Climate Risks

    The Financial Stability Oversight Council (FSOC) released a report in response to the U.S. President's Executive Order on climate-related financial risk.

    October 21, 2021 WebPage Regulatory News
    News

    BIS Paper Mulls Policies to Alleviate Challenges Posed by Big Techs

    The Bank for International Settlements (BIS) published a paper that examines the business models and the associated risks posed by big technology firms foraying into financial services sector.

    October 21, 2021 WebPage Regulatory News
    News

    BIS to Launch Asian Green Bond Fund Early Next Year

    The Bank for International Settlements (BIS) announced the development of an Asian Green Bond Fund, in collaboration with the development financing community, to channel global central bank reserves to green projects in Asia Pacific.

    October 21, 2021 WebPage Regulatory News
    News

    CFRF Publishes Guides to Manage Financial Risks from Climate Change

    The working groups of the Climate Financial Risk Forum (CFRF) published a second round of guides (or Session 2 guides), written by the industry for the industry, to help financial firms manage climate-related financial risks.

    October 21, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7608