BERN, SWITZERLAND – The Swiss financial surveillance body Finma will be keeping a closer eye on Swiss banks, particularly the two big banks UBS and Credit Suisse, under rules approved by the governing Federal Council Wednesday 23 May. Finma will work more closely with corporate auditors and strengthen its field team with the goal of keeping a close eye on banks’ risks.
Finma was established in 2009 shortly after UBS was bailed out by the federal government. Its activities cover the entire financial industry. Under the new rules, drawn up based on Finma’s initial three years of experience, banks have an ad hoc Finma unit that will work more closely with the central bank and bank surveillance groups abroad to keep a close eye on the banks’ markets activities.
Supervisory Instruments and the Organisation of FINMA, report prepared for the Federal Council, November 2011
BERN, SWITZERLAND – PostFinance, the banking arm of Swiss Post, will be more directly supervised by Finma, the Swiss financial supervisory body, for compliance with the country’s money laundering act, starting in December 2011.
The move is part of the gradual shift of PostFinance to its new status as a public limited company, owned by Swiss Post, in 2013. At that point it will be fully supervised by Finma.
Switzerland: IMF checks economic winds in 2011
Bern, Switzerland (GenevaLunch) - The IMF (International Monetary Fund) in its annual country report on Switzerland says the economy is broad-based in the aftermath of the global economic crisis. It is forecasting 2.1 percent growth for 2011 and 1.8 percent in 2012, when it expects exports to fall.
“Domestic demand is benefiting from low interest rates, increased employment and continuing immigration. In spite of the strength of the Swiss franc, exports have grown due to increased global demand.” Geopolitical tensions could have a negative impact and are the biggest risk factor, agreed the IMF team, who visited Switzerland from 18 to 28 March. Tensions in the euro zone could also spark difficulties.
The SNB (Swiss National Bank) could consider tightening monetary policy, the IMF group says, with rebuilding its capital a priority. The central bank’s capital was drained during the crisis, as were those of many governments. Future dividends to the cantons and the Confederation should be made subject to the ability of the SNB to replenish its capital.
The heaviest criticism was reserved for the banking regulatory system, which needs further work, according to the IMF. The Federal Department of Finance will create a working group to follow up one issue: the mandates of the SNB and Finma, the financial supervisory body, should be clarified, according to the IMF.
Additional capital requirements provided for in the Federal Council’s “too big to fail” consultation draft will be instrumental in limiting the risks posed by systemically important banks. Consequently, the IMF experts warn against allowing overly generous “rebate” possibilities. Switzerland’s new capital requirements are among the most stringent in the world, going well beyond bank capital requirements that are part of the new, global BIS (Bank for International Settlements) Basel agreement.
In the mortgage market, the IMF sees a certain degree of easing in financial institutions’ lending standards, says Bern. “The interest-rate sensitivity of banks’ balance sheets has increased due to the tendency towards fixed-rate mortgages with long maturities” and the IMF is in favour of “implementing more conservative affordability standards”, which could be bad news for new home owner wannabes.
The IMF has given its support to several ongoing improvements:
- “The neutral fiscal position to be expected over the next few years is considered appropriate” says Bern’s statement on the IMF visit
- the measures to restructure disability insurance must continue
- the IMF welcomes the ongoing efforts to strengthen financial planning and statistics.
Bern, Switzerland (GenevaLunch) – Swiss financial supervisory body Finma quietly but firmly announced during the week that “a legislative basis must be created that brings previously unregulated activities under supervision,” a reference to institutional asset managers’ work, including hedge funds.
Foreign hedge funds go largely unregulated
The news did not rock the financial world, but it raised a red flag. Hedge funds moving to Switzerland have made global financial headlines largely because of UK fears that the industry is moving to Switzerland for tax purposes and as a result the British financial industry will be weakened.
There could well be another, globally more worrisome reason to be concerned about them shifting business to Switzerland, Finma suggests: lack of supervision under current Swiss law.
Hedge funds are part of the institutional investor industry, and it is not widely known that their business in Switzerland is largely unregulated, a situation that Finma says is unacceptable.
Bern, Switzerland (GenevaLunch) – Switzerland’s financial system managers have set up a financial crisis unit: the federal finance ministry, the central bank and the bank supervisory body Finma have signed an MOU (memorandum of understanding) in line with a 2010 directive from the government in the wake of the global financial crisis.
The steering committee for the unit will meet at least once a year to create a set of crisis management tools and “as often as necessary” in the event of a crisis. The new committee will be relatively autonomous, with the head of the Federal Department of Finance responsible for deciding on the timing of informing the full seven-member ruling Federal Council of the need to take measures, but he or she must inform them immediately when “risk assessment reveals the likelihood of exceptional measures having to be taken by the authorities”.
Zurich, Switzerland (GenevaLunch) - Bloomberg reports that two of Switzerland’s 133 insurance companies “need to take urgent measures” to comply with insolvency test rules, part of their obligations under new rules set by Finma, the financial regulatory body. Seven other companies, none of which have been named, are reportedly on a watch list, although they are all above a 60 percent ratio: Finma requires 100 percent.
Finma sent out a letter to insurance companies earlier in 2010 noting that many of them were not yet up to the required standards, which go into effect in January. Le Matin and other Swiss media have been sounding alarm bells for consumers that the new solvability requirements are likely to mean higher life insurance costs.
Gov’t opens for consultation proposed changes to law for “too big to fail banks”
Geneva lawyer, professor to head board of Swiss financial regulator
Anne Heritier Lachat will chair Finma board in 2011
Bern, Switzerland (GenevaLunch) - The Swiss Federal Council said early Wednesday afternoon 22 December that it will carry out its mandate for tax talks with Germany and the United Kingdom, following consultations with parliamentary commissions and the cantons. Switzerland in October 2010 signed agreements with the other two countries to open talks, which are now scheduled to begin in early 2011. “The goal with Germany and the UK will be to achieve regularization of previously undeclared assets as well as a final withholding tax for future income. In return, Switzerland should gain better market access for financial services, in particular,” the council said in an e-mailed statement.
The key points for the negotiations are considered confidential and will not be published, according to Bern.
The talks will be led for the Swiss by State Secretary Michael Ambühl, head of the State Secretariat for International Financial Matters (SIF).
New “too big to fail” laws could come into force by 2012
Bern, Switzerland (GenevaLunch) - Switzerland’s two biggest banks, UBS AG and Credit Suisse Group, need to increase their capital reserves beyond international standards, said on 4 October, a committee of public-private experts appointed by the Swiss Federal Council to address the issue of “too big to fail.”
The Committee of Experts believes that both banks are indeed “too big to fail,” but that measures should be put in motion to prevent any possible collapse (not only of the banks but of the Swiss economy).
The new proposal, backed by the Swiss National Bank, SNB, and the country’s financial regulator Finma; goes beyond the Basel III rules agreed to last month by the 27 member countries of the Basel Committee on Banking Supervision.
The Basel III rules establish reserves of 7 percent in common equity and 10.5 percent in total capital, while the new proposal require much higher reserves by 2019; 10 percent and 19 percent respectively.
The committee also proposed specific oversight measures in core areas including liquidity, risk diversification and organisation.
Swiss banks’ stress tests shows “both banks would still have a solid capital base” in case of global recession
Basel, Switzerland (GenevaLunch.com) – Credit Suisse and UBS, Switzerland’s two large banks, would both have capital ratios of at least 8 percent, should they be subject to stresses from a global economic recession, Finma, the country’s financial regulatory body, said Friday evening 23 July.
Finma published the results of its stress tests on the two banks, conducted since 2008, in parallel with announcements by the European Union and 91 of its largest banks about the results of EU bank stress tests.
Seven of the 91 European banks failed the stress tests, five “caja” or savings banks in Spain, Germany’s Hypo Real Estate and Greece’s ATE bank, a result that led, according to the Financial Times, to investors signalling “their distrust of the assumptions underlying the tests and the surprisingly small number of banks to fail the tests.”
Finma explained in publishing its results that the stress tests were developed with the Swiss National Bank, the country’s central bank. “Analyses of this kind are a key component of its normal supervisory activities. Finma requires Credit Suisse and UBS to have sufficient excess capital and liquidity to enable them to absorb unforeseen events at any time. The large banks should therefore have a tier 1 ratio of at least 8 percent even under such stress scenarios. If this requirement were not met, Finma would work with the institution in question to consider reducing its risk positions and/or strengthening its capital base and then instruct suitable measures.”
The stress tests check the banks’ capacity to deal with specific scenarios. “The latest scenario covers different regions of the world over a two-year period. It assumes a global recession, accompanied by a slump in prices on the financial and real estate markets,” Finma says in its press release. “Developments in Europe have also been added, with specific and very sharp shocks assumed for some European countries. In view of UBS and Credit Suisse’s relatively low exposure to these countries, however, the impact of these particular shocks turns out to be small.”
Bern, Switzerland (GenevaLunch) – A flurry of news came out of Bern Wednesday afternoon, as the Swiss government (Federal Council) held a desk-clearing session. Bank deposits and bank supervision changes were part of the package.
Deposits insured to CHF100,000
One decision is to extend by a year the temporary measures taken during the financial crisis, to protect bank deposits, in order to allow a new law to go into effect in 2012. Insured bank deposits will thus become law for the first time.
The temporary protection amount up to CHF100,000 will be maintained by the new law, which also obliges banks to maintain 125 percent of their claims covered and other assets inside Switzerland. The total amount guaranteed has been raised to CHF6 billion and pension-related deposits will be given top priority for reimbursement in case a bank fails.
Bank supervision in leadup to financial crisis criticized
Swiss media have been quick to jump on details of a report approved by the government Wednesday, “Clarification of the actions of the Financial Market Supervisory Authority in the financial market crisis”, in particular noting that parties on the left and right were both critical of the report for not going far enough or going too far.
Swiss ministers head for Washington for joint IMF and World Bank meeting
Credit Suisse shares fall despite CHF2.05b profits
Bern / Zurich, Switzerland (GenevaLunch) – Credit Suisse and UBS, Switzerland’s two largest banks, will be subject to new liquidity rules starting 30 June 2010, part of efforts by the national bank and bank supervisory body to ensure that if the banks face a major crisis they will not pull the economy down with them. The news was announced Wednesday by the Swiss National Bank (SNB) and Finma, the supervisory body that was created in January 2009, who say the new liquidity rules are necessary to replace current ones, in place since 1988. These have not been revised significantly and “cannot ensure a level of resistance to crises for big, globally active Swiss banks, which is high enough.”
Finma and the SNB defined what they call “a stringent stress scenario” which “covers a general crisis on the financial markets coupled with a creditors’ loss of trust in the bank.
More Swiss banking news:
- Swiss National Bank and Finma supervisory body will work more closely
- UBS says IRS has eyes on 20 Swiss banks
Zurich, Switzerland (GenevaLunch) - Swiss bank UBS has told Swiss German newspaper Tages-Anzeiger that it sent letters to several Swiss politicians early in the week to encourage them to approve an agreement between Bern and Washington, DC that now goes to parliament for a vote.
Bern, Switzerland (GenevaLunch) - The finance commission of the Swiss Parliament’s lower house agreed Thursday 21 January to set up a special investigative commission to review decisions made by Swiss authorities concerning UBS. The new commission will review decisions made by the Swiss Federal Council, the Swiss National Bank and Finma, the financial system supervisory body, in three areas: the UBS bailout in the contect of the financial markets crisis, changes to supervisory regulations covering UBS and the decision by Finma for UBS to release client data to US tax authorities.
Finma appeals to Supreme Court
Bern, Switzerland (GenevaLunch) – Switzerland’s financial market supervisory authority, Finma, has decided to appeal to the country’s supreme court in the UBS client data case. A lower court had found it acted wrongly in ordering UBS to turn over the names of 300 of the bank’s US clients to the US tax authorities in February 2009.
Finma’s board voted 21 January to take its case to the Federal Supreme Court, saying it (Finma) “is using the opportunity to have Switzerland’s supreme court pass judgment on the extent of the Financial Market Supervisory Authority’s legal latitude in crisis situations.”
Bern, Switzerland (GenevaLunch) – The Federal Council, Switzerland’s cabinet, has stepped into the debate over a ruling by the Swiss Administrative Tribunal, announced 11 January, that the Swiss banking supervisory body had no legal right to tell bank UBS to hand client names to US tax authorities. The Council made it clear 13 January that it played a key role in the decision by Finma, the banking authority, to agree the names should be given, outside the usual procedures called for by a bilateral judicial assistance treaty with the United States
Bern, Switzerland (GenevaLunch) – The Swiss Financial Market Supervisory Authority (Finma) says it wants banks’ remuneration policies to be more closely aligned with the long-term health of the institution. They should not be an incentive to take risks which may undermine the company. But it will not cap bonuses. Finma announced its new circular Wednesday 11 November. The new regulations take effect 1 January 2010.
Finma says that variable remuneration, or bonuses, should reflect an employee’s stake in the success of the company, in the company’s overall performance, and should reflect the risks the company takes. Finma encourages senior employees’ bonuses to be deferred in order to ensure that the company’s health is aligned with their remuneration.
Bern, Switzerland (GenevaLunch) – The Swiss Federal Council, concerned about changes to the G20 group of the world’s largest economies and calls for changes to other international financial bodies, has told the country’s finance ministry to take steps to strengthen Switzerland’s role in the IMF (International Monetary Fund) and the World Bank. Developing countries and emerging markets have been calling for reform of these two bodies, the two Bretton Woods international financial institutions, in recent months, suggesting that voting weights need to be reconsidered. Switzerland is keen to ensure that its seats on the Executive Councils of each group become permanent.
The cabinet (Federal Council) has also instructed the finance ministry to work closely with the Swiss National Bank and the Swiss financial market supervisory authority Finma to strengthen its role in the Financial Stability Board (FSB).
Bern, Switzerland (GenevaLunch) – Switzerland’s new bank regulatory body has outlined its strategic goals for the next three years, highlighting increased supervision of the markets and more effective enforcement. It has promised the government it will deal with the problem of TBTF (too-big-to-fail) institutions. The Swiss government Wednesday 30 September approved Finma’s (Swiss Financial Market Supervisory Authority) goals.
Finma was put together from three existing supervisory bodies, and came into existence 1 January 2009. It had its baptism by fire with the financial crisis, beginning with the collapse of Lehman Brothers one year ago and the UBS crisis late in 2008, a consequence of the bank’s incursion into the sub-prime market. The Swiss government had to step in with guarantees and huge purchases of UBS convertible bonds to ensure the bank’s solvency during the early days of the crisis.
Finma’s goals state that “the systemic importance and damage potential of large, complex institutions” (like UBS and Credit Suisse) needs to be reduced to a politically acceptable level.
Bern, Switzerland (GenevaLunch) – The Swiss Financial Market Supervisory Authority (Finma) recognizes that no one was completely prepared for the financial crisis that hit Switzerland in August 2007 nor did they realize the extent of the dangers the crisis posed, Finma says in a report 14 September. But effective remedial action was taken quickly by the Swiss Federal Banking Commission (SFBC), and lessons have been learned. It says that Finma’s own structure was not an impediment to an adequate reaction to the crisis.
Zurich, Switzerland (GenevaLunch) – A report detailing how Switzerland’s financial institutions will ensure smooth business operations in case of major disruptions to the system has been released by the Swiss National Bank (SNB). A working group has been focusing on ensuring continuity in interbank payment systems and on the provision of liquidity by the SNB, the report says. Banking authorities (the SNB and Finma, the Swiss Financial Market Supervisory Authority) have been working with the banking industry (Citigroup, Credit Suisse, Postfinance, UBS) and financial infrastructure operators (Six Group) on the plan.
Bern, Switzerland (GenevaLunch) – Finma, Switzerland’s Financial Market Supervisory Authority, is to require cantonal banks and cooperative banks to submit to the capital adequacy rules to which other financial institutions are subject in Switzerland. These banks will have to improve and extend their capital base by increasing equity. They were allowed exceptions to the rules until now.
Cantonal banks, notably, will no longer benefit from the implicit advantage they have of tax-payer support should they get into difficulties, but will have to be run on much the same lines as normal commercial banks.
Bern, Switzerland (GenevaLunch) - The Swiss banks regulatory body, Finma, has begun consulting with the banking industry and other concerned parties on a system that would limit salaries and bonuses in order to avoid excessive risk in the future. The consultation runs from now to 14 August and the system is expected to go into effect in January 2010, with banks required to comply by 2011. UBS, however, must comply with the principles in 2009, as part of the agreement under which it is receiving government funding.
Two of the key features are greater transparency and performance compensation based on longer periods, but Finma also emphasized in publishing news of the consulting process 3 June that banks’ boards will be expected to play a stronger role in overseeing pay. The proposed policy, referred to as the Circular, would apply to all financial institutions, not just large banks, which is what international financial market supervisory bodies are currently recommending.
ACM's new offices, Zurich, Switzerland
Geneva, Switzerland (GenevaLunch) – ACM, the world’s largest currency trader, based in Geneva, Monday announced that is opening a new office in Zurich. The announcement comes on the heels of confirmation last week that it has applied for a banking license. The company told GenevaLunch in October 2008 that it would be applying for a license, partly as a result of changes in Swiss law covering online transactions, but that it intends to maintain currency trading as its principle business.
Police visit more fuss than trouble
Geneva, Switzerland (Le Temps, Fre) – Le Temps 13 March carries a lengthy article about the story behind some of the 258 client names released by Swiss bank UBS to the IRS, the US tax collector. Douglas Hornung, a Geneva-based lawyer who represents four of the people whose names were given to the IRS with the agreement of Finma (Swiss banks supervisory body), says his clients were not informed that their names were on the list, and in the case of two of them, an American couple resident in the US, they were not informed in January that an investigation was underway.
Bern, Switzerland (GenevaLunch) – Geneva-based Le Temps reports Friday afternoon that the Swiss Administrative Tribunal, the legal body where two appeals were lodged by UBS clients whose names were among those given to the US government 18 February, has ruled that the US request to have banking secrecy lifted was indeed well-founded in these cases: their banking activities constitute fraud.
Updated 12:05 Zurich, Switzerland and Washington, DC, USA (GenevaLunch) – UBS, Switzerland’s largest bank, the US Justice Department and the Securities and Exchange Commission Wednesday 18 February signed an agreement designed to end a dispute over the bank’s offshore business with US clients. The agreement is provoking mixed reactions, with the Wall Street Journal saying that the “settlement puts the Swiss bank on the road to closing an embarrassing period,” while there is concern in Switzerland that the speed with which the bank and national banking authority have moved, under pressure from the US, have resulted in Swiss law not being respected. American citizens in Switzerland are also voicing concerns about a likely negative impact of the agreement in the long run on their ability to manage their finances,
