New capital adequacy requirements will apply to Swiss banks from 2025
Published: Wednesday, Nov 29th 2023, 11:30
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The Swiss financial center is to become safer. An amended Capital Adequacy Ordinance (CAO) for banks will come into force on January 1, 2025.
The Federal Council adopted the amendment to the ordinance at its meeting on Wednesday, as detailed in a press release from the State Secretariat for International Financial Matters (SIF). The final Basel III standards of the international Basel Committee on Banking Supervision (BCBS) will thus be transposed into Swiss law.
The focus of the national implementation of the Basel III reform is that risky areas of the banking business must be backed with more capital and less risky areas with less capital.
On average, no significant change in the total capital requirements is expected for the Swiss banking sector, according to the press release. However, the capital requirements for UBS - now the only major Swiss bank since the takeover of CS - are expected to increase.
Transparent and comparable
The changes will limit the scope for internal models to determine capital requirements. A transparent and internationally comparable calculation of own funds is also possible.
'Basel III' is a global reform package of the BCBS that aims to strengthen the solvency and liquidity of banks. The BCBS adopted the framework in December 2017 and completed it in February 2019 with a revised minimum standard for market risks.
According to the press release, Switzerland had already started implementing the standards "some time" before the takeover of Credit Suisse by UBS in March 2023. However, this crisis has further underlined the need for this. The implementation will further strengthen the stability of the Swiss financial center and the basis for international business for local banks.
"Too big to fail" on the test bench
The so-called "too big to fail" regulation for systemically important banks will also be evaluated as part of a report by the Federal Council. This should be available in spring 2024.
The amendments to the ordinance were drawn up by the Federal Department of Finance (FDF) in collaboration with the Swiss Financial Market Supervisory Authority FINMA and the Swiss National Bank (SNB) in consultation with the banking sector. The implementation drafts in Australia, the EU, Hong Kong, Canada, Singapore, the UK and the USA were taken into account as a comparison.
Australia, Japan and Canada have already adapted their regulations. In the EU and the USA, implementation is planned for January 1 and July 1, 2025 respectively. The FDF intends to inform the Federal Council again about the status of international implementation by the end of July 2024 at the latest.
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