Finma boss wants to be able to carry out more on-site inspections
Published: Tuesday, Oct 1st 2024, 15:50
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The financial market supervisory authority Finma wants to intervene more early on in the institutions it supervises. Last but not least, Finma wants the authority to carry out in-depth on-site inspections at banks, even if there is not yet a "fire risk", as Finma Director Stefan Walter explained in a presentation.
Early intervention needs to be strengthened precisely where the problems usually begin, Walter said at the "Finance Forum" in Zurich on Tuesday: "Namely where there are weaknesses in the risk culture, governance and business models". Risk-based on-site inspections are an important instrument here to ensure that supervision goes into the necessary depth.
Overall, Finma needs "new instruments, a clearer legal basis and probably also more resources", demanded the director of the supervisory authority. This would enable it to intervene "proportionately and as effectively as possible" at an early stage.
Samples
In-depth on-site inspections are standard practice at the world's most important supervisory authorities, emphasized Walter. In Switzerland, this instrument has also been in place for some time. However, in the banking sector there are certain legal requirements that limit the scope of discretion for such preventive on-site inspections, said the Finma boss.
In order for the supervisory authority to take action at an early stage, it must be able to take a sample of loans, for example in the lending business. This would allow them to determine whether the value adjustments are conservative enough to cover the default risk. In the case of institutions with potentially increased money laundering risks, an in-depth on-site audit could, for example, take a representative sample of customers to determine whether the necessary onboarding checks have been carried out.
Principle-based principles
Meanwhile, the Financial Market Authority remains technology-neutral, emphasized Walter. "We do not favor or disadvantage one innovation over another on the basis of its technology". The focus is on the risks associated with the activities, regardless of the technology on which they are based. The "same business, same risks, same rules" approach allows Finma to apply the existing, principle-based principles to new developments.
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