The Swiss Financial Market Supervisory Authority (FINMA) revised the circular on operational risk and resilience for banks, with the circular entering into force on January 01, 2024. Additionally, the Swiss Federal Council published a report on sustainability, issued a paper on prevention of greenwashing, and discussed open finance developments in Switzerland. Finally, the Swiss National Bank (SNB) published the quarterly reporting form (Form ARIS 5.14) and related documentation for counterparty solvency risk in the interbank sector, with the form becoming valid from December 31, 2022.
Below are additional highlights of key aforementioned updates:
- The revised circular on operational resilience considers new technological developments and supervisory practices on management of operational risk, particularly in connection with information and communication technology, handling of critical data, and cyber risks. The circular adopts the revised principles for managing operational risks and the new principles on operational resilience published by the Basel Committee on Banking Supervision (BCBS) in March 2021. The circular will replace the Swiss Bankers Association’s “Recommendations for Business Continuity Management (BCM),” which are recognized as a minimum standard. Additional gradual transitional provisions for ensuring operational resilience will apply over two years.
- The report on sustainability sets out fifteen measures that are planned for 2022 to 2025 and are intended to consolidate the position of Swiss financial center as a leading global location for sustainable finance. The fifteen measures are divided into four areas covering sustainability data from all sectors of the economy, transparency in the financial sector, impact investments and green bonds, and pricing pollution. The measures are aimed, among other things, at ensuring more and better sustainability data from all sectors of the economy—for instance through disclosures on climate compatibility. The report states that the overall transparency in the financial sector should be increased, particularly if financial institutions apply the recently introduced Swiss Climate Score or join international net-zero alliances.
- The paper on prevention of greenwashing notes that financial products or services should only be advertised as being sustainable if they are compatible with at least one sustainability goal or contribute to achieving a sustainability goal. The paper indicates that financial products and services aimed at reducing environmental, social, and governance (ESG) risks should be labeled as sustainable only if they pursue a sustainable investment goal in addition to a purely financial one. The Federal Department of Finance (FDF) has been instructed to set up a working group together with the Federal Department of the Environment, Transport, Energy and Communications (DETEC), the Federal Department of Economic Affairs, Education and Research (EAER), the FINMA, and representatives from the affected industries and civil society to determine the best way to implement the position of Federal Council on the prevention of greenwashing. The Council expects FDF to present a plan and concrete proposals on the prevention of greenwashing by September 30, 2023.
- With respect to the open finance developments in Switzerland, the Federal Council welcomed the targets set by the Federal Department of Finance with the aim to strengthen the ability of individuals to freely use their financial data, including to benefit from new services, and innovative capacity and competitiveness of the Swiss economy and the financial center. Open finance enables financial data to be exchanged via standardized and secure data interfaces at the request of clients. The Council is of the view that concrete progress and greater commitment are needed with regard to the opening up of data interfaces and thus, has instructed the FDF to submit measures by June 2024 in the event that the financial sector does not sufficiently commit to opening up its interfaces.
- Circular on Operational Risk Circular
- Report on Sustainable Finance
- Position on Prevention of Greenwashing
- Press release on Open Finance
- Reporting on Counterparty Solvency Risk
Keywords: Europe, Switzerland, Banking, Operational Risk, Cyber Risk, Operational Resilience, Sustainable Finance, ESG, Climate Change Risk, Greenwashing, Open Finance, Regtech, FINMA, Swiss Federal Council, Basel, SNB
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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