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July 16, 2018

FINMA published revised circulars on interest rate risks, disclosures, capital requirements, and capital held by banks. FINMA has adopted a consistently proportionate approach in these amended circulars: the further refined Basel standards have been implemented in a differentiated manner. The circulars come into effect on January 01, 2019.

The evolution of the BCBS standards, changes to the Banking Ordinance and Capital Adequacy Ordinance issued by the Federal Council, and amended international accounting standards have necessitated changes to a number of FINMA circulars, in particular FINMA Circulars 2019/2 “Interest rate risks – banks” and 2016/1 “Disclosure – banks.” This revision package is one of the last steps in the national implementation of the Basel III standards. The implementation of the net stable funding ratio (NSFR) and the revised standards published by the Basel Committee in December 2017 are still pending. These will be handled under the lead of the Federal Department of Finance via amendments to the relevant Federal Council ordinances and associated FINMA circulars. FINMA held a consultation on the revised circulars, which supported the revision, although the respondents also expressed reservations mainly about interest rate risks. The consultation had closed on January 31, 2018.

The revised circular on disclosures adopts a more principle-based approach and the scope of disclosure varies according to the banking category. Institutions can now individually amend the scope of their disclosure without providing further justification for doing so: if a bank considers certain items of information subject to disclosure not to be important, it may refrain from disclosing such information. The banking sector welcomed this flexibility. The revised provisions apply to disclosure with effect from December 31, 2018. Additionally, in 2016 and 2017, the Federal Council had revised its Banking Ordinance and Capital Adequacy Ordinance regarding capital buffer and credit risks. FINMA observes these amendments in Circulars 2011/2 “Capital buffer and capital planning – banks” and 17/7 “Credit risks – banks”. Circular 13/1 “Eligible capital – banks” has also been updated and now includes necessary, new requirements for the treatment of the expected credit loss provisions established under international accounting standards when determining regulatory capital.

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Effective Date: January 01, 2019

Keywords: Europe, Switzerland, Banking, Basel III, Interest Rate Risk, Capital Requirements, Disclosures, IFRS 9, Revised Circulars, Proportionality, FINMA

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