Featured Product

    IMF Reports Examine Stability of Financial System in Switzerland

    June 26, 2019

    IMF published a report assessing the financial system stability of Switzerland, under the Financial Sector Assessment Program (FSAP). It also published eight technical notes that cover stress testing the banking sector, selected issues on banking supervision, macro-financial analysis and macro-prudential policy, insurance regulation and supervision, insurance stress testing, financial safety net and crisis management arrangements, supervision and oversight of financial market infrastructures (FMIs), and regulation and supervision of asset management activities.

    The FSAP report reveals that Swiss financial institutions are well-capitalized and could withstand the severe shocks under the adverse stress test scenarios, but macro-financial vulnerabilities are deepening. Important reforms have been made since the 2014 FSAP, but several critical recommendations and emerging challenges have yet to be fully addressed. Capital buffers have increased across all categories of banks and while the two global systemically important banks have downsized and deleveraged significantly since the global financial crisis, since 2013 they have been growing again. Macro-prudential measures have not been taken since 2014. To effectively address rising risks and inaction bias, the macro-prudential toolkit should be expanded with supply- and demand-side tools and the macro-prudential policy decision-making process should be made more agile, with greater expectation to act. FINMA’s autonomy, governance, and accountability should also be strengthened, in addition to further enhancing the recovery and resolution planning. The deposit insurance system should be thoroughly reformed to secure a fully-funded public deposit insurance agency with a government backstop and the authority to use deposit insurance funds for resolution measures, subject to safeguards.

    The assessment highlights that legislative work is ongoing to support fintech developments, enhance insurance business conduct regulation and policyholder protection, and introduce an insurance resolution regime. The FSAP assessment also shows that regulatory framework for the insurance sector is highly sophisticated, but oversight of operational risk management and conduct regulation should be strengthened. The regulatory framework is robust and the solvency regime is one of the most developed in the world. Some shortcomings exist in conduct regulation where a new law is expected to strengthen the legal framework and policyholder protection. FINMA is exercising its insurance supervision powers diligently, but more frequent audits on operational effectiveness could support accountability and more binding requirements are needed. The assessment highlights that the availability of timely, consistent, and granular data is necessary to avoid risks going undetected. Enhancing supervisory reporting would strengthen stress testing. Furthermore, fintech firms benefiting from sandbox initiatives should be subject to reporting requirements; better data should also inform development of fintech-related policies and legislation. 

    Risks in the rapidly growing fintech space may not be well-understood due to data gaps, resource constraints, and the authorities’ liberal approach. Legislative reforms to facilitate digitization should preserve a level playing field and avoid singling out blockchain and distributed ledger technology as the technological winners. The Swiss authorities are at the global forefront of promoting blockchain and distributed ledger technology by providing legal clarity and certainty. A recent Federal Council report proposes legislative changes to embed blockchain technology and distributed ledger technology into existing laws. The authorities describe the initiative’s approach as underpinned by the principle of “technology-neutrality,” with some exceptions. In departing from this principle and creating a new blockchain and distributed ledger technology infrastructure category, the authorities should identify risks, including regarding new types of misconduct, and introduce appropriate legal safeguards to maintain a safe and stable Swiss financial system. Accordingly, legislative amendments for the new blockchain and distributed ledger technology infrastructure category should include clear and transparent eligibility standards and requirements to ensure operational safety and stability.

     

    Related Links

    Keywords: Europe, Switzerland, Banking, Insurance, Securities, FMI, FSAP, Technical Notes, Macro-Prudential Policy, Fintech, Financial Stability, FINMA, IMF

    Related Articles
    News

    SEC Finalizes Capital and Margin Requirements for Security-Based Swaps

    SEC adopted a package of rules and rule amendments to establish capital, margin, and segregation requirements for security-based swaps, under Title VII of the Dodd-Frank Act.

    August 22, 2019 WebPage Regulatory News
    News

    ECB Revises Prudential Provisioning Expectations for New NPEs

    ECB is revising its supervisory expectations for prudential provisioning of new non-performing exposures (NPEs) specified in the “Addendum to the ECB Guidance to banks on non-performing loans” (Addendum)

    August 22, 2019 WebPage Regulatory News
    News

    CFTC Proposes to Revise Information Collection on Margin Requirements

    CFTC is requesting comments on the burdens associated with certain aspects of the Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (final rule).

    August 21, 2019 WebPage Regulatory News
    News

    FASB to Delay Effective Date for Insurance Contracts Standard

    FASB issued a proposed Accounting Standards Update that would grant all insurance companies that issue long-duration contracts, such as life insurance and annuities, additional time to apply the standard that addresses this area of financial reporting.

    August 21, 2019 WebPage Regulatory News
    News

    EBA Publishes Phase 2 of Technical Package on Reporting Framework 2.9

    EBA published phase 2 of its technical package on the reporting framework 2.9, which includes validation rules, Data Point Model (DPM) data dictionary, and XBRL taxonomies.

    August 21, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Its Consultation Related to SME Financing

    FSB published responses received to the consultation on a report on the evaluation of the effects of financial regulatory reforms on small and medium-sized enterprise (SME) financing.

    August 21, 2019 WebPage Regulatory News
    News

    APRA Revises Related Entities Standard for Banks

    APRA published a strengthened prudential standard APS 222 on associations with related entities, with the aim to mitigate contagion risk within banking groups.

    August 20, 2019 WebPage Regulatory News
    News

    EBA and ESMA Issue Joint Response to EC Letter on Crypto-Assets

    EBA and ESMA issued a joint response to the EC letter, from July 19, 2019, on crypto-assets.

    August 20, 2019 WebPage Regulatory News
    News

    FSB on Responses to Consultation on Wind-Down of Trading Portfolios

    FSB published responses received to the consultation on the solvent wind-down of the derivatives and trading book portfolio of a global systemically important bank (G-SIB).

    August 19, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Consultation on Resolvability Disclosures

    FSB published responses received to the consultation on disclosures for resolution planning and resolvability of banks.

    August 19, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3681