FINMA revised several circulars with the aim to implement the small bank regime in Switzerland. FINMA implementing this regime as of January 01, 2020, following a pilot phase and a consultation. The pilot project with 68 participating institutions will end on December 31, 2019. For the definitive launch of the small banksregime, the Federal Council also revised the Capital Adequacy Ordinance. In this context, FINMA has amended eight circulars: outsourcing for banks and insurers (Circular 18/3), operational risk for banks (Circular 08/21), corporate governance of banks (Circular 17/1), disclosures by banks (Circular 16/1), risk distributions for banks (Circular 19/1), credit risk for banks (Circular 17/7), capital buffer and capital planning of banks (Circular 11/2), and liquidity risks for banks (Circular 15/2).
FINMA will inform banks and securities dealers from Supervisory Categories 4 and 5 over the next few days about the further procedure and the registration process for the small bank regime. The small banksregime seeks to increase efficiency in regulation and supervision of small, particularly liquid and well-capitalized institutions. The consultation participants and the institutions involved in the pilot project welcome the FINMA initiative to introduce a small bank regime and largely support the adjustments to the circulars. FINMA has incorporated various suggestions from the consultation in the final circulars, to define certain relaxations more precisely.
Banks wishing to participate in the small banksregime must, therefore, be extremely well-capitalized and enjoy high liquidity. In return, they are to benefit from a significantly less complex regulatory regime under the Capital Adequacy Ordinance, which allows them, for example, to forego the calculation of risk-weighted assets. There will also be reduction in the qualitative burden in accordance with the adjusted FINMA circulars. Owing to the exemptions and relaxations, the institutions participating in the small bank regime can expect to be able to save costs directly and indirectly in the future.
Related Link (in German): Press Release and Revised Circulars
Effective Date: January 01, 2020
Keywords: Europe, Switzerland, Banking, Small Banks, Proportionality, Capital Adequacy, Disclosures, Credit Risk, Liquidity Risk, Operational Risk, Outsourcing, FINMA
Previous ArticleHKMA Consultation on Framework for Supervision of Liquidity Risk
The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.
The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.
The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.
The European Banking Authority (EBA) published a methodological guide to mystery shopping.
The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs.
The European Securities and Markets Authority (ESMA) has responded to the IFRS consultation on targeted amendments to the IFRS Foundation constitution to accommodate an International Sustainability Standards Board (ISSB) to set IFRS Sustainability Standards.