Federal Council adopts report on systemically important banks
Bern, 28.06.2017 - During its meeting on 28 June 2017, the Federal Council adopted the evaluation report on systemically important banks, concluding that the regulatory model does not need to be fundamentally adapted. Gone concern capital requirements should apply not only for the two big banks in the future, but also for domestically focused systemically important banks.
The existing rules in the Banking Act should prevent systemically important financial institutions from having to be bailed out using taxpayers' money in the event of a crisis. Under Article 52 of the Banking Act, the Federal Council must carry out a review at two-year intervals to examine whether these provisions are in line with the international standards, as well as to check the manner in which the standards have been implemented abroad. The first such evaluation report was adopted on 18 February 2015.
The Federal Council concluded in the present report that Switzerland's regulatory approach is suitable for reducing the risk of systemically important banks. Overall, the approach is to be seen in a positive light by international standards; it is not necessary to fundamentally adapt the regulatory model.
The Federal Council sees a need for action in the area of gone concern capital requirements. Corresponding provisions have applied for the two big banks, Credit Suisse and UBS, since 1 July 2016. The Federal Council would now like to introduce gone concern requirements also for domestically focused systemically important banks (PostFinance AG, Raiffeisen and Zürcher Kantonalbank). Like for the big banks, they should reflect the going concern capital requirements, but only 40% of them. With this proposal, the Federal Council is taking into consideration the fact that the banks in question are less interconnected internationally and are thus less systemically important. The three domestically focused systemically important banks differ in terms of their organisational structure and ownership. Account should be taken of these specific features with individual treatment and flexibility with regard to implementation of the measures.
The Federal Council has instructed the Federal Department of Finance (FDF) to prepare a consultation draft on the necessary legal amendments. The FDF is required to include the Swiss Financial Market Supervisory Authority (FINMA), the Swiss National Bank (SNB) and the affected banks in the work.
Systemically important banks must have sufficient going concern capital to maintain their services even in a stress scenario without state support and without having to be restructured or wound up.
Going concern capital requirements cannot always prevent a systemically important bank from having to be restructured or wound up. Consequently, such banks should additionally hold gone concern capital. This is used either to restructure a bank or to continue a bank's systemically important functions in a functioning unit and wind up the other units without recourse to public resources.
Address for enquiries
Frank Wettstein, Communications,
State Secretariat for International Financial Matters SIF
Tel. +41 58 462 38 56, email@example.com