Consultation on amendments to Capital Adequacy Ordinance

Bern, 07.04.2017 - On 7 April 2017, the Federal Department of Finance (FDF) initiated a consultation on amendments to the Capital Adequacy Ordinance (CAO). The revision should see the introduction of a non-risk-based leverage ratio for all banks, as well as new risk diversification rules. The consultation will last until 14 July 2017. An in-depth impact study will be carried out at the same time as the consultation.

The revision was prepared by a national working group made up of representatives of the Federal Administration and the sector. The Swiss Financial Market Supervisory Authority (FINMA) subjected the changes to an impact study with individual banks in 2015. The revision will implement two additions to the Basel III international framework.

Leverage ratio

In addition to the existing provisions, the revision envisages a new capital adequacy requirement that does not differentiate according to risk: core capital for all banks should account for at least 3% of their total exposure. Almost every bank in Switzerland has been in compliance with that value for several years. More stringent requirements have applied for systemically important banks since 2013.

Risk diversification

The capital adequacy requirements are supplemented by those concerning risk diversification. Risk concentrations are now to be measured only according to core capital; large exposures exceeding 25% of core capital should no longer be permitted in principle. This will now apply vis-à-vis communes too. There will be further changes for the financing of residential properties and for Swiss mortgage bonds.

In-depth impact study and simplifications

The impact study mentioned at the start revealed initial effects of the revision for the financing of residential properties and for mortgage bonds. FINMA will carry out a further, broadly-based survey in parallel to the consultation. The FDF will take the results of that into consideration with regard to the adoption of the revised ordinance. Particularly for small institutions, the new risk diversification regulations should be proportional. The revision should enter into force on 1 January 2018 for the leverage ratio and on 1 January 2019 for risk diversification.

Address for enquiries

Frank Wettstein, Communications, State Secretariat for International Financial Matters SIF
Tel. +41 58 462 38 56, frank.wettstein@sif.admin.ch