New capital adequacy rules for Swiss banks
Bern, 24.10.2011 - Switzerland intends to implement the capital adequacy rules of the international Basel III framework for all banks. The Federal Department of Finance FDF is submitting the amended Capital Adequacy Ordinance for consultation, and FINMA is doing likewise with its adapted circulars.
After the 2008/2009 financial crisis, there was a general consensus at national and international level that the banking sector needs stricter capital requirements. Under the leadership of the Basel Committee on Banking Supervision (BCBS), the new Basel III regulatory framework was drawn up during the course of the last three years, requiring banks to hold significantly more capital of a better quality with a view to absorbing losses more effectively.
Against this international backdrop, the Swiss provisions on banks' capital levels are to be revised and the international Basel III standards adopted. The existing Swiss regime with capital buffers which go beyond these international minimum standards remains in effect.
The new provisions are to enter into force on 1 January 2013 and, in line with the transitional deadlines of the international regulatory framework, will be fully implemented by the end of 2018. The over 300 banks in Switzerland are affected to different extents depending on their current capital base and their diverging business models. The greatest impact will be on the two big banks, for which the "too big to fail" draft regulations that have now been passed by parliament prescribe even more stringent requirements. The FDF will carry out its own consultation in November regarding the resultant changes to the Ordinance.
Almost all Swiss institutions already hold sufficient high-quality capital to comply with the implementation in Switzerland of the new international capital requirements.
Not all the elements of the international Basel III framework will be implemented in this proposed revision of the Capital Adequacy Ordinance and of the relevant FINMA circulars. On the one hand, banks could be obliged to hold additional capital for a variable anti-cyclical buffer aligned with the economic cycle. The banks will also have the opportunity to comment on this matter, as well as on the implementation of the stricter risk weightings for residential properties initiated by the Federal Council on 17 August 2011, in a further consultation. On the other hand, the introduction of an unweighted leverage ratio and of new minimum standards for liquidity risks is subject to preventive observation periods to identify any unforeseen effects that may arise. The relevant draft revisions for Swiss banks will follow starting in 2012.
Address for enquiries
Tel. +41 58 462 60 33
Federal Department of Finance