The Swiss Federal Council has tightened the regulations on capital requirements and on risk diversification in a bid to remedy regulatory deficits, which came to light in the banking sector in the wake of the financial crisis. During a recent meeting, the Federal Council revised the Capital Adequacy Ordinance accordingly.
According to the Swiss Federal Administration, the financial crisis made it quite clear that the risks of loss attached to trading activity and to securitisation were underpinned by insufficient capital levels, and notes that in July 2009 and June 2010, the Basel Committee published more stringent regulations as a response to the financial crisis. These regulations should, it states, be adopted unchanged in Swiss regulations.
The administration also points out that in July 2009, the European Union (EU) presented improved standards on risk diversification, in particular in the interbank market, and states that of these standards, the most important concerning supervision law are to be integrated into the current revision. Switzerland plans to adopt the remaining, amended standards, together with the implementation of the Basel III agreement, in Swiss law.
In its statement, the administration emphasizes that together with the Capital Adequacy Ordinance, four Financial Market Supervisory Authority (FINMA) circulars will also be amended. These circulars contain implementation provisions on the Capital Adequacy Ordinance (circular 08/19 credit risks - banks, circular 08/20 market risks - banks, circular 08/22 capital adequacy disclosure - banks, and circular 08/23 risk diversification - banks).
Commenting on the latest decisions, the administration states that:
“With this revision, Swiss regulations will once again be in line with the pertinent international reference standards. It will have a tangible impact on the Swiss big banks in particular but has no direct link with the "too big to fail" debate. The stricter regulations envisaged will affect the big banks to the same degree as their international competitors. They will also hit the other banks to varying degrees.”
The revised Capital Adequacy Ordinance together with the FINMA circulars are due to enter into force on January 1, 2011.
According to the Swiss Federal Administration, the financial crisis made it quite clear that the risks of loss attached to trading activity and to securitisation were underpinned by insufficient capital levels, and notes that in July 2009 and June 2010, the Basel Committee published more stringent regulations as a response to the financial crisis. These regulations should, it states, be adopted unchanged in Swiss regulations.
The administration also points out that in July 2009, the European Union (EU) presented improved standards on risk diversification, in particular in the interbank market, and states that of these standards, the most important concerning supervision law are to be integrated into the current revision. Switzerland plans to adopt the remaining, amended standards, together with the implementation of the Basel III agreement, in Swiss law.
In its statement, the administration emphasizes that together with the Capital Adequacy Ordinance, four Financial Market Supervisory Authority (FINMA) circulars will also be amended. These circulars contain implementation provisions on the Capital Adequacy Ordinance (circular 08/19 credit risks - banks, circular 08/20 market risks - banks, circular 08/22 capital adequacy disclosure - banks, and circular 08/23 risk diversification - banks).
Commenting on the latest decisions, the administration states that:
“With this revision, Swiss regulations will once again be in line with the pertinent international reference standards. It will have a tangible impact on the Swiss big banks in particular but has no direct link with the "too big to fail" debate. The stricter regulations envisaged will affect the big banks to the same degree as their international competitors. They will also hit the other banks to varying degrees.”
The revised Capital Adequacy Ordinance together with the FINMA circulars are due to enter into force on January 1, 2011.
