Featured Product

    FINMA Assesses Recovery and Emergency Plans of Large Swiss Banks

    February 25, 2020

    FINMA published a report that provides detailed assessment of the recovery and resolution plans of the systemically important Swiss institutions. FINMA has approved the recovery plans of all five systemically important Swiss banks. In addition, the two large Swiss banks were required to produce effective emergency plans for their Swiss operations by the end of 2019. FINMA views the Swiss emergency plans of Credit Suisse and UBS as effective and approves them. However, the emergency plans of the three domestic systemically important banks—PostFinance, Raiffeisen, and Zürcher Kantonalbank—do not meet the statutory requirements yet.

    Following the financial crisis of 2007-2008, FINMA promulgated special rules for the stabilization, restructuring, or liquidation of troubled institutions. The rules require higher capital and liquidity buffers as well as plans for recovery and resolution. There are four main instruments in this context:

    • Recovery plan. The systemically important bank or financial market infrastructure sets out how it would stabilize itself in a crisis. This plan requires the approval of FINMA.
    • Swiss emergency plan. In this plan, a systemically important bank details how it would ensure uninterrupted continuity of its systemically important functions in Switzerland (particularly access to deposits and payments) in crisis. FINMA must review this plan and evaluate whether it is ready to be implemented if necessary.
    • Resolution plan. FINMA produces a global resolution plan for Credit Suisse and UBS. This indicates how the entire global group would be recapitalized, restructured, and/or (partially) liquidated in a crisis. Resolution plans are also required for the domestic systemically important banks and systemic financial market infrastructures. FINMA assesses the resolvability of an institution on the basis of whether the preparations of the institution are sufficient to successfully implement the plan if necessary.
    • Rebates. FINMA can grant UBS and Credit Suisse rebates on certain components of the capital requirements if they have made significant improvements in their global resolvability. In 2019, Credit Suisse and UBS utilized 40% and 42.5% of their maximum rebate potential, respectively.

    FINMA regards the emergency plan of Credit Suisse to be effective. UBS has been also judged by FINMA to have met the requirements for an effective emergency plan, with the qualification that certain joint and several liabilities remain excessive. The three domestic systemically important banks also submitted an emergency plan, but were at different stages of implementation at the end of 2019. None of the plans has been deemed to be effective yet. At Zürcher Kantonalbank, there is a plausible plan for how the capital and liquidity resources required in the event of a crisis can be built up further. Raiffeisen and PostFinance do not yet have plausible plans for accumulating the necessary gone-concern funds for recapitalization in a crisis. All three domestic banks have work underway to develop an effective emergency plan. The domestic systemically important banks have little or no foreign business and their resolution plans relate solely to the systemically important functions in Switzerland. They are, therefore, largely interchangeable with the emergency plans.

    FINMA is, however, required to draw up a global resolution plan for the global systemically important banks: Credit Suisse and UBS. Unlike the emergency plan, which relates purely to the systemically important functions of banks in Switzerland, this global resolution plan covers the entire banking group worldwide. FINMA concluded that both the banks already took important preparatory steps and made considerable progress with respect to their global resolvability. FINMA believes the requirements for structural disentanglement are now fulfilled. For instance, the two banks created holding structures and Swiss subsidiaries to facilitate this disentanglement. In other areas, particularly with regard to funding in resolution, further implementation work still needs to be done. 


    Related Links

    Keywords: Europe, Switzerland, Banking, Too-Big-To-Fail, Rebates, Recovery and Resolution, G-SIBs, D-SIBs, Systemic Risk, Resolution Framework, FINMA

    Featured Experts
    Related Articles

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News

    ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite

    The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.

    December 22, 2022 WebPage Regulatory News

    FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates

    The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.

    December 20, 2022 WebPage Regulatory News

    FSB Reports Assess NBFI Sector and Progress on LIBOR Transition

    The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.

    December 20, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8697