Featured Product

    IMF Reports Examine Stability of Financial System in Switzerland

    June 26, 2019

    IMF published a report assessing the financial system stability of Switzerland, under the Financial Sector Assessment Program (FSAP). It also published eight technical notes that cover stress testing the banking sector, selected issues on banking supervision, macro-financial analysis and macro-prudential policy, insurance regulation and supervision, insurance stress testing, financial safety net and crisis management arrangements, supervision and oversight of financial market infrastructures (FMIs), and regulation and supervision of asset management activities.

    The FSAP report reveals that Swiss financial institutions are well-capitalized and could withstand the severe shocks under the adverse stress test scenarios, but macro-financial vulnerabilities are deepening. Important reforms have been made since the 2014 FSAP, but several critical recommendations and emerging challenges have yet to be fully addressed. Capital buffers have increased across all categories of banks and while the two global systemically important banks have downsized and deleveraged significantly since the global financial crisis, since 2013 they have been growing again. Macro-prudential measures have not been taken since 2014. To effectively address rising risks and inaction bias, the macro-prudential toolkit should be expanded with supply- and demand-side tools and the macro-prudential policy decision-making process should be made more agile, with greater expectation to act. FINMA’s autonomy, governance, and accountability should also be strengthened, in addition to further enhancing the recovery and resolution planning. The deposit insurance system should be thoroughly reformed to secure a fully-funded public deposit insurance agency with a government backstop and the authority to use deposit insurance funds for resolution measures, subject to safeguards.

    The assessment highlights that legislative work is ongoing to support fintech developments, enhance insurance business conduct regulation and policyholder protection, and introduce an insurance resolution regime. The FSAP assessment also shows that regulatory framework for the insurance sector is highly sophisticated, but oversight of operational risk management and conduct regulation should be strengthened. The regulatory framework is robust and the solvency regime is one of the most developed in the world. Some shortcomings exist in conduct regulation where a new law is expected to strengthen the legal framework and policyholder protection. FINMA is exercising its insurance supervision powers diligently, but more frequent audits on operational effectiveness could support accountability and more binding requirements are needed. The assessment highlights that the availability of timely, consistent, and granular data is necessary to avoid risks going undetected. Enhancing supervisory reporting would strengthen stress testing. Furthermore, fintech firms benefiting from sandbox initiatives should be subject to reporting requirements; better data should also inform development of fintech-related policies and legislation. 

    Risks in the rapidly growing fintech space may not be well-understood due to data gaps, resource constraints, and the authorities’ liberal approach. Legislative reforms to facilitate digitization should preserve a level playing field and avoid singling out blockchain and distributed ledger technology as the technological winners. The Swiss authorities are at the global forefront of promoting blockchain and distributed ledger technology by providing legal clarity and certainty. A recent Federal Council report proposes legislative changes to embed blockchain technology and distributed ledger technology into existing laws. The authorities describe the initiative’s approach as underpinned by the principle of “technology-neutrality,” with some exceptions. In departing from this principle and creating a new blockchain and distributed ledger technology infrastructure category, the authorities should identify risks, including regarding new types of misconduct, and introduce appropriate legal safeguards to maintain a safe and stable Swiss financial system. Accordingly, legislative amendments for the new blockchain and distributed ledger technology infrastructure category should include clear and transparent eligibility standards and requirements to ensure operational safety and stability.

     

    Related Links

    Keywords: Europe, Switzerland, Banking, Insurance, Securities, FMI, FSAP, Technical Notes, Macro-Prudential Policy, Fintech, Financial Stability, FINMA, IMF

    Related Articles
    News

    EIOPA Report Analyzes Use and Impact of Long-Term Guarantee Measures

    EIOPA submitted—to the European Parliament, the Council of the European Union, and EC—its 2020, fifth, and last annual report on long-term guarantee measures and measures on equity risk.

    December 03, 2020 WebPage Regulatory News
    News

    BIS, SNB, and SIX Announce Successful Completion of CBDC POC

    The BIS Innovation Hub Swiss Centre, SNB, and the financial infrastructure operator SIX announced the successful completion of a joint proof-of-concept (PoC) experiment as part of the Project Helvetia.

    December 03, 2020 WebPage Regulatory News
    News

    EBA Sets Out Treatment of Certain Banking Book Positions Under FRTB

    EBA published the final draft regulatory technical standards for calculation of own funds requirements for market risk, under the standardized and internal model approaches of the Fundamental Review of the Trading Book (FRTB) framework.

    December 03, 2020 WebPage Regulatory News
    News

    EIOPA Consults on Integrating Climate Change into SII Standard Formula

    EIOPA published discussion paper on a methodology for the potential inclusion of climate change in the Solvency II (sometimes also written as SII) standard formula when calculating natural catastrophe underwriting risk.

    December 02, 2020 WebPage Regulatory News
    News

    EU Issues Corrigenda to Investment Firms Directive and Regulation

    EU published, in the Official Journal of the European Union, corrigenda to the Directive and the Regulation on the prudential requirements and supervision of investment firms.

    December 02, 2020 WebPage Regulatory News
    News

    MAS Proposes Changes to Rules Arising from Banking Amendment Act

    MAS proposed amendments to certain regulations, notices, and guidelines arising from the Banking (Amendment) Act 2020.

    December 02, 2020 WebPage Regulatory News
    News

    PRA to Elaborate on Approach to Transposition of CRD5 by Mid-December

    PRA published a statement that explains when to expect further information on the PRA approach to transposing the Capital Requirements Directive (CRD5), including its approach to revisions to the definition of capital for Pillar 2A.

    November 30, 2020 WebPage Regulatory News
    News

    RBNZ Consults on Aspects of Insurance Act, Solvency Standards & IFRS17

    RBNZ launched consultations on the scope of the Insurance Prudential Supervision Act (IPSA) 2010 and on the associated Insurance Solvency Standards.

    November 30, 2020 WebPage Regulatory News
    News

    SRB Sets Out Work Program for 2021-2023

    SRB published the work program for 2021-2023, setting out a roadmap to further operationalize the Single Resolution Fund and to achieve robust resolvability of banks under its remit over the next three years.

    November 30, 2020 WebPage Regulatory News
    News

    EIOPA Consults on KPIs on Sustainability for Non-Financial Reporting

    EIOPA is consulting on the relevant ratios to be mandatorily disclosed by insurers and reinsurers falling within the scope of the Non-Financial Reporting Directive as well as on the methodologies to build these ratios.

    November 30, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6191