Financial Stability Board appreciates Swiss financial market regulation
Bern, 25.01.2012 - The Financial Stability Board (FSB) takes a positive view of the "too big to fail" legislation in its peer review report on Switzerland. The reaction of the authorities during the financial crisis and the progress made regarding the supervision of insurance companies and pension funds are also positively highlighted. However, the FSB does see room for improvement in the case of specific aspects of banking supervision, such as the use of external auditors, for example.
Within the scope of its membership of the FSB, Switzerland has undergone a peer review by other FSB members for the first time. According to the report published today, the FSB appreciates the "too big to fail measures" which should enter into force in March 2012. In this regard, the FSB recognises Switzerland's influential role in international discussions on the capital requirements for systemically important banks. Moreover, the FSB emphasises the successful introduction of the new financial instrument in the form of contingent convertible bonds (CoCos) will be crucial for the success of this package of measures.
The FSB recognises the progress made by Switzerland in the area of bank supervision, and particularly regarding FINMA's operational independence and resources. However, the FSB views the extensive use of external auditors with a critical eye. Regarding the cantonal banks, the FSB notes the good quality and high level of their capital. However, it suggests that the cantons step up their reforms in order to eliminate the state guarantee enjoyed by most cantonal banks in order to put them on an equal footing with the other banks.
The FSB welcomes the latest insurance oversight reforms, and particularly the introduction of the Swiss Solvency Test. The FSB acknowledges the introduction of a supreme supervisory committee in the area of pension fund supervision as a step towards the recommended centralisation.
In addition, the FSB report covers some recent developments in the financial market area. Here the reaction of the authorities during the recent financial crisis and specifically the measures taken at the end of 2008 to stabilise UBS are positively highlighted. In the FSB's opinion, the Swiss financial centre overall faces a number of major challenges due to the changing regulatory environment.
Country reviews and the Financial Stability Board
The Financial Stability Board (FSB), which is based in Basel, deals with financial market stability and financial market regulation issues. Its members include 54 authorities from 24 countries (G20 countries, Switzerland, the Netherlands, Spain, Singapore and Hong Kong) and ten international organisations and standard-setting bodies. Switzerland is represented in the FSB by the Federal Department of Finance and the Swiss National Bank, as well as at working group level and by FINMA.
The FSB members are obliged to undergo a regular country review. Switzerland is the fifth country to have been assessed by the other FSB members. These "peer reviews" assess the progress made since the last Financial Sector Assessment Program (FSAP) of the International Monetary Fund (IMF), using selected FSAP recommendations as a basis. The FSB reviews also address recent developments that are of particular interest as regards financial stability.
Address for enquiries
Mario Tuor, Head of Communications, State Secretariat for International Financial Matters, tel. +41 31 322 46 16
Federal Department of Finance