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SFMA welcomes Federal Council dispatch on Banking Act revision

SFMA supports the Federal Council dispatch on revising the Banking Act and calls for the full package of TBTF measures to be implemented.

SFMA welcomes the Federal Council's dispatch on revising the Banking Act. The bill is one of several measures intended to strengthen banking stability, and SFMA recommends implementing the full set of measures proposed in the Federal Council's parameters for Banking Act amendments.

The Federal Council has set out how it intends to adjust Switzerland's too-big-to-fail framework for capital requirements. SFMA supports the adopted bill. The insufficient capital backing of foreign subsidiaries at systemically important banks, often referred to as double leverage, has been recognised internationally as a risk for more than 20 years. Switzerland is now being asked for the second time since 2012 to abolish it.

The broader TBTF reforms are central to the long-term stability and prosperity of the Swiss financial centre. The capital-strengthening bill is important, but it is only one element of the overall package.

New preventive instruments

In a more complex risk environment, financial resilience depends on strong risk culture and governance as well as adequate capital and liquidity coverage. Supervisors also need statutory powers that allow preventive intervention before problems become acute.

For three years, SFMA has publicly advocated stronger statutory tools, consistent with recommendations in the Federal Council TBTF report and the Parliamentary Investigation Committee report. It supports an accountability regime, authority to impose fines, greater ability to communicate about concluded proceedings and powers to intervene at an early stage.

SFMA considers the lessons of the Credit Suisse crisis properly addressed only if the law is strengthened with these preventive measures. It therefore sees full implementation of the Federal Council's proposed Banking Act package as essential.