Swiss regulator confirms emergency plans of Credit Suisse and UBS are effective

Maria Nikolova

The emergency plans of PostFinance, Raiffeisen and Zürcher Kantonalbank, however, do not meet the statutory requirements yet.

The Swiss financial market supervisory authority FINMA today published a report providing a detailed assessment of the recovery and resolution plans of the systemically important Swiss institutions. The regulator finds the Swiss emergency plans of Credit Suisse and UBS are effective. The emergency plans of PostFinance, Raiffeisen and Zürcher Kantonalbank, however, do not meet the statutory requirements yet.

Systemically important banks must demonstrate in the emergency plan that their systemically important functions can be continued without interruption in a crisis. Only functions that are critical to the Swiss economy are deemed systemically important, which includes in particular the domestic deposit and lending businesses as well as payment services. Thus, it is sometimes referred to as the Swiss emergency plan. FINMA reviews the measures in the emergency plan with regard to their effectiveness if the bank were at risk of insolvency.

In the recovery plan, the systemically important institutions set out which measures they will use to ensure their stability on a sustainable basis in the event of a crisis and be able to continue their business activities without government intervention.

All five systemically important Swiss banks have submitted recovery plans to FINMA. The regulator has approved all of these plans. In addition the two large Swiss banks were required to produce effective emergency plans for their Swiss operations by the end of 2019. FINMA has reviewed these. In the case of Credit Suisse, FINMA views the emergency plan as effective. UBS is also judged by FINMA to have met the requirements for an effective emergency plan, with the qualification that certain joint and several liabilities remain excessive.

The three domestic systemically important banks have also submitted an emergency plan, but were at different stages of implementation at the end of 2019. None of the plans is deemed to be effective yet. At Zürcher Kantonalbank there is a plausible plan for how the capital and liquidity resources required in the event of a crisis can be built up further. Raiffeisen and PostFinance do not yet have plausible plans for accumulating the necessary gone concern funds for recapitalisation in a crisis.

All three domestic banks have work ongoing to develop an effective emergency plan.

FINMA is required to draw up a global resolution plan for the two large banks. Unlike the emergency plan, which relates purely to the banks’ systemically important functions in Switzerland, this global resolution plan covers the entire banking group worldwide. FINMA assesses this global resolvability on the basis of whether the preparations of the large banks are sufficient to successfully implement the resolution plan if necessary.

It has concluded that both banks have already taken important preparatory steps and have thus made considerable progress with respect to their global resolvability. In particular, FINMA believes the requirements for structural disentanglement are now fulfilled. In other areas, particularly with regard to funding in resolution, further implementation work still needs to be done. It should be noted that the regulatory requirements have not yet been published in this area.

Systemically important financial market infrastructures are also required to prepare a recovery plan detailing the action they would take to ensure their stability on a sustainable basis in a crisis. Both financial market infrastructures designated as systemically important in Switzerland (SIX x-clear and SIX SIS) have recovery plans in place. The plans have been continuously improved, but due to the high standards for these plans further improvements are needed before they meet the conditions for approval.

The regulator says it has also started working on the development of resolution plans for SIX x-clear and SIX SIS.

Read this next

Metaverse Gaming NFT

DCentral Miami brings together all of Web3, NFT, DeFi, Metaverse

The world’s biggest Web3 meeting entitled DCENTRAL Miami is set to take place November 28-29, featuring a lineup of some of the biggest and most influential names in the blockchain space.

Digital Assets

Crypto ban expands across UK banks as Starling joins ‎crackdown

UK digital bank Starling has banned ‎all customer payments related to cryptocurrencies, another blow for the crypto traders ‎who recently saw a sizable number of banks deciding not to ‎finance the wobbly asset class.‎

Interviews

Markets Direct at FIA EXPO 2022: Traders know what they want from brokers

The FIA Expo 2022, one of the most prestigious events within the global derivatives trading industry, took place in Chicago on 14 & 15 November.

Interviews

FIA Expo 2022: TNS addresses public cloud limitations with hybrid infrastructure

November is the month of the FIA Expo, one of the largest futures and options conferences in the world, bringing together regulators, exchanges, software vendors, and brokers in one place: the Sheraton Grand Chicago Riverwalk. 

Retail FX

Italy’s regulator blacks out Finance CapitalFX, MFCapitalFX

Italy’s Commissione Nazionale per le Società e la Borsa (CONSOB) has shut down new websites in an ongoing clampdown against firms it accuses of illegally promoting investment products in the country.

Retail FX

Suspected leader of Honk Kong ramp-and-dump scam appears in court

A leader of a sophisticated ramp-and-dump scheme made his first court appearance in a Hong Kong court today, charged with market manipulation and various criminal offences. The case stems from an earlier joint operation of Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), and the local police. 

Institutional FX

Cboe’s James Arrante discusses growing demand for fixed income, FX algo

We caught up with James Arrante, senior director of FX & US treasuries product and business management at Cboe Global Markets, to uncover emerging trends in the FX and fixed income markets and learn more about the bourse operator’s recent initiatives.

Retail FX

Eurotrader acquires UK broker Petra Asset Management

Eurotrader Group has formally entered into the UK market with the acquisition of FCA-regulated broker, previously named Petra Asset Management Ltd. The new entity operates under the brand name Eurotrade Capital Ltd.

Inside View, Retail FX

The Game of Chess Continues – OPEC, China and the Oil Market

Over the past decade, the US has been complaining about the amount of power which the BRIC group, and specifically China, has on the global economy. BRIC stands for Brazil, Russia, India and China; these were the world’s fastest growing economies. Only in the past 10 months, the US has turned their attention toward OPEC due to the prices of fuel. Nevertheless, China seems to have a strong influence even over the price of crude oil.

<