Only UBS and Credit Suisse, two of the five consistently important Swiss banks, passed the FINMA crisis planning test with effective plans.
The assessment follows a review of the recovery and resolution plans of the country’s major banks that FINMA ordered to be submitted by the end of 2019.
The review followed the implementation of the Swiss Too Big to Fail rules, aimed at reducing risks in the country’s financial system and avoiding the need for taxpayer-funded bailouts.
The implementation of the Swiss regime of the too big to fail is of crucial importance for the stability of the financial center ”
Mark Branson, Managing Director of FINMA, said: “The implementation of the Swiss too big to fail regime is of crucial importance for the stability of the financial center.” Following a review of the plans, the Swiss financial regulator admitted that only UBS and Credit Suisse had plans that could be effective in dealing with a crisis situation.
FINMA said UBS meets the requirements of an effective contingency plan, although some joint and several responsibilities remain excessive. Credit Suisse’s contingency plan has been effective, the regulator said.
The contingency plans of the other three systemically important banks – PostFinance, Raiffeisen [RFSHW.UL] and Zuercher Kantonalbank [ZKB.UL]- do not yet meet legal requirements, added the regulator.
More than a decade after the 2008 financial crisis, FINMA continues to pressure Switzerland’s largest banks to make it clear that they have the capital and liquidity reserves necessary to survive a massive financial shock . The government poured 6 billion Swiss francs ($ 6.1 billion) to bail out UBS amid the depths of the financial crisis, a move that remains controversial.
Only functions critical to the Swiss economy are considered to be of systemic importance, which includes in particular national deposit and credit activities as well as payment services. Thus, it is sometimes referred to as a Swiss emergency plan.
Credit Suisse CFO David Mathers said: “Defining a comprehensive resolution approach, meeting capital requirements and implementing structural and operational improvements has been key to our Too Big to Fail program.
“In addition, Credit Suisse has been a pioneer in the area of the bail-in mechanism, the new international standard for bank resolution. of 787.3 billion francs. “
The regulator was particularly unhappy with the level of preparedness of PostFinance and Raiffeisen. The pair did not come up with plausible plans for a crisis scenario.
Zürcher Kantonalbank did not have an effective Swiss contingency plan, but had a “plausible plan”.