Three major Swiss banks not fully ready for new crash

Head of FINMA Mark Branson, speaking in 2019. © Keystone / Peter Klaunzer

Switzerland’s financial markets watchdog has concluded that three of the country’s five systemically important banks – i.e. those ‘too big to fail’ – are not fully prepared for a crisis scenario.

A report releasedExternal link by FINMA on Tuesday found that the emergency plans in case of a ‘disorderly failure’ at Postfinance, Raiffeisen, and Zurich Cantonal Bank were not up to scratch.

While the latter presented a plan that was “plausible”, the other two did not have the measures in place to ensure that losses could be offset, the financial supervisory body said.

On the other hand, Crédit Suisse and – albeit with certain reservations about high levels of liabilities – UBS saw their contingent emergency plans approved.

This pair, who are also active internationally, are now working on a resolution plan to detail how a restructuring or wind-down ordered by FINMA would be done on a global level.

The emergency plans, ordered by FINMA to be ready by the end of 2019, aim to show that in case of a financial crash the banks would be able to continue carrying out essential functions, without the need for publicly funded support.

In the view of FINMA, these essential functions include depositing and withdrawing cash, as well as facilitating payments within Switzerland.

FINMA director Mark Branson said on Tuesday that the three banks in question were continuing to work on their plans. He also praised efforts made so far, saying that “implementation has made good progress, though we are not yet fully there”.