Consultation on amendments to Capital Adequacy Ordinance

Bern, 23.02.2018 - On 23 February 2018, the Federal Department of Finance (FDF) initiated a consultation on amendments to the Capital Adequacy Ordinance (CAO). The revision will focus on capital requirements for any restructuring and resolution (gone concern requirements), which should now also be introduced for the three systemically important Swiss banks which do not operate internationally.

The second review of the too-big-to-fail provisions by the Federal Council revealed a need for action in the case of so-called gone concern capital requirements. These requirements are designed to ensure that a bank which has got into difficulty can be restructured or wound up in an orderly manner. After being applicable for UBS and CS already since 2016, they should now apply also for domestically focused systemically important banks (PostFinance AG, Raiffeisen and Zürcher Kantonalbank). Here too, the new requirements should reflect the already applicable going concern capital requirements, which are designed to ensure the continuation of business activities in the case of major losses. Unlike for the big banks, this reflection should amount to only 40%, as the domestically focused banks are less interconnected internationally and are less systemically important.

The revision of the CAO will provide the opportunity to newly regulate the treatment of systemically important banks' stakes in their subsidiaries. The current deduction of financial interests from capital should be replaced by a financial interest risk weighting.

Furthermore, which units within a financial group perform systemically important functions and accordingly have to meet special requirements will be more clearly defined. This should continue to include the parent entities of the two big banks.

Finally, group companies which provide the services necessary for the continuation of a bank's business processes will now be subject to consolidated supervision by FINMA.

Address for enquiries

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