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
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).