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October 31, 2017

FINMA modified several bank-related circulars in accordance with the changes in International Financial Reporting Standards (IFRS) and Basel III rules. FINMA is consulting on these changes and the consultation ends on January 31, 2018. Changes are due to become effective on January 01, 2019, which is one year later than under the international implementation schedule.

Key changes coming into effect in 2018 concern new standards governing interest rate risk in the banking book and standards on disclosure. Concurrently, the revised version of IFRS 9 will also enter into force and needs considered by banks when calculating their eligible capital. FINMA, therefore, proposed the following revisions to its corresponding circulars:

  • Updated requirements for managing interest rate risk. Latest Basel standards on interest rate risks in the banking book require a full revision of the corresponding FINMA circular (FINMA Circular 2008/6). No minimum capital will be prescribed for interest rate risks under the Pillar 1 approach. FINMA has followed the suggestion of supervised institutions not to apply the optional standardized framework according to Basel standards, instead, acting upon an industry proposal, it will broaden the scope of existing interest rate reporting arrangements and envisage more comprehensive and meaningful disclosure rules than under the Basel standards.
  • Differentiated disclosure. FINMA Circular 2016/1 on bank disclosures is being amended to adopt the new disclosure tables on key metrics and interest rate risks in accordance with Basel III.
  • IFRS-compliant calculation of eligible capital. One of the key components of IFRS 9 is a new requirement for the value adjustments of expected losses. FINMA Circular 2013/1 titled "Eligible capital – banks" is being amended to make the necessary technical adaptations.
  • Minor revisions. FINMA circulars 2011/2 on capital buffer and capital planning of banks and 2017/7 on credit risks of banks will also be selectively revised. Provisions on bank categories and capital buffers in circular 2011/2 have become redundant, as both these considerations are now determined under Federal Council ordinances. These provisions will be cancelled as part of the amendments to these circulars.

Related Link: Press Release

Comment Due Date: January 31, 2018

Effective Date: January 01, 2019

Keywords: Europe, Switzerland, Banking, Basel III, IFRS 9, Revised Circulars, Proportionality, FINMA

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