SWITZERLAND Law and Practice Contributed by: Judith Raijmakers and Florian Thomas Willi, Loyens & Loeff
SIBs SIBs are required to maintain higher levels of regulatory capital compared to other banks (ie, there are additional requirements for SIBs). This ensures they can better withstand unexpected losses from their regular business operations (going concern) and aims to minimise the risk of restructuring, winding up by FINMA or even state intervention (gone concern). To guarantee progression of the bank (ie, from the going concern perspective), SIBs are required to comply with: • baseline requirements: 12.86% RWA ratio and 4.5% leverage ratio; • a surcharge (or add-on): the size of the sur - charge depends on the degree of systemic importance (in particular, the bank’s total exposure and market share in domestic lend - ing and deposit business); and • CCyB (applicable to all banks). The going concern requirements need to be largely met with CET1 capital. Additionally, in the event of a crisis (ie, from a gone concern perspective), SIBs must have extra funds available to absorb losses. Domes - tic systemically important banks (D-SIBs) must maintain gone concern capital requirements of at least 40% of their going concern capital. For global systemically important banks (G-SIBs) at the consolidated group level, the requirement is 100%, with FINMA having the authority to grant rebates. The gone concern requirements are typically fulfilled with bail-in bonds (which need to meet certain eligibility criteria, such as being issued by the group holding company under Swiss law and with jurisdiction of the Swiss courts).
Like “regular” banks, SIBs must limit concentra - tion risks, with a standard cap of 25% of Tier 1 capital. However, for SIBs, exposure to other SIBs, whether Swiss or global, is capped at 15% of Tier 1 capital. 8. Insolvency, Recovery and Resolution 8.1 Legal and Regulatory Framework Insolvency Regulations In Switzerland, the measures to be taken by banks (and fintech-licenced entities) in the event of insolvency risks are regulated in the BankA and aim to ensure business continuity, streamlin - ing of restructuring and time-efficient repayment of preferential deposits. If there are justified concerns that a bank is over- indebted or facing serious liquidity issues, or if it fails to meet the capital adequacy requirements by the deadline set by FINMA, the supervisory authority can impose (i) protective measures; (ii) restructuring measures; and (iii) the liquidation of the bank, all as set out in the BankA. Initial protective measures may include issuing directives to the bank’s management, revoking their authority to represent the bank, dismissing them, or prohibiting the bank from making or receiving payments and conducting securities transactions. The aim of ordering these protec - tive measures is the continuation of the bank at risk. Protective measures can be issued on a standalone basis or in combination with restruc - turing or liquidation measures. If justified (realistic chance of restructuring), FIN - MA may initiate restructuring measures to ensure continuation of the bank or single banking ser - vices. FINMA will then issue the necessary direc -
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