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

    EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models

    The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.

    June 21, 2022 WebPage Regulatory News
    News

    EP Reaches Agreement on Corporate Sustainability Reporting Directive

    The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).

    June 21, 2022 WebPage Regulatory News
    News

    PRA Consults on Model Risk Management Principles for Banks

    The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.

    June 21, 2022 WebPage Regulatory News
    News

    EC Regulation Amends Standards for Calculating Credit Risk Adjustments

    The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.

    June 21, 2022 WebPage Regulatory News
    News

    BIS Hub Updates Work Program for 2022, Announces New Projects

    The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.

    June 17, 2022 WebPage Regulatory News
    News

    EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance

    The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.

    June 17, 2022 WebPage Regulatory News
    News

    US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule

    Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)

    June 16, 2022 WebPage Regulatory News
    News

    EIOPA Consults on Review of Securitization Framework in Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.

    June 16, 2022 WebPage Regulatory News
    News

    UK Authorities Issue Regulatory and Reporting Updates for Banks

    The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.

    June 15, 2022 WebPage Regulatory News
    News

    BCBS Issues Climate Risk Principles while HKMA Expresses Its Support

    The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.

    June 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8286