FINMA revised several circulars with the aim to implement the small bank regime in Switzerland. FINMA implementing this regime as of January 01, 2020, following a pilot phase and a consultation. The pilot project with 68 participating institutions will end on December 31, 2019. For the definitive launch of the small banksregime, the Federal Council also revised the Capital Adequacy Ordinance. In this context, FINMA has amended eight circulars: outsourcing for banks and insurers (Circular 18/3), operational risk for banks (Circular 08/21), corporate governance of banks (Circular 17/1), disclosures by banks (Circular 16/1), risk distributions for banks (Circular 19/1), credit risk for banks (Circular 17/7), capital buffer and capital planning of banks (Circular 11/2), and liquidity risks for banks (Circular 15/2).
FINMA will inform banks and securities dealers from Supervisory Categories 4 and 5 over the next few days about the further procedure and the registration process for the small bank regime. The small banksregime seeks to increase efficiency in regulation and supervision of small, particularly liquid and well-capitalized institutions. The consultation participants and the institutions involved in the pilot project welcome the FINMA initiative to introduce a small bank regime and largely support the adjustments to the circulars. FINMA has incorporated various suggestions from the consultation in the final circulars, to define certain relaxations more precisely.
Banks wishing to participate in the small banksregime must, therefore, be extremely well-capitalized and enjoy high liquidity. In return, they are to benefit from a significantly less complex regulatory regime under the Capital Adequacy Ordinance, which allows them, for example, to forego the calculation of risk-weighted assets. There will also be reduction in the qualitative burden in accordance with the adjusted FINMA circulars. Owing to the exemptions and relaxations, the institutions participating in the small bank regime can expect to be able to save costs directly and indirectly in the future.
Related Link (in German): Press Release and Revised Circulars
Effective Date: January 01, 2020
Keywords: Europe, Switzerland, Banking, Small Banks, Proportionality, Capital Adequacy, Disclosures, Credit Risk, Liquidity Risk, Operational Risk, Outsourcing, FINMA
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.