The Federal Council has learned some right lessons from the Credit Suisse (CS) crisis, but the regulatory package has been made even stricter and is overloaded and, in some respects, detrimental to Switzerland.

With the proposals published today, the Federal Council is acting on important lessons learned from the CS crisis that will lead to further strengthening of the Swiss financial centre’s stability. 

The key measures are as follows:  

• Liquidity: The CS crisis exposed weaknesses in the provision of liquidity. Extending and destigmatising the provision of liquidity by the Swiss National Bank (SNB) for all banks and the proposed introduction of a public liquidity backstop for systemically important banks close the gaps in the existing safety net.
• Management: CS collapsed due to years of mismanagement and the resulting loss of confidence. Establishing clear management responsibilities in a targeted manner through a senior managers regime and enshrining remuneration principles in law could prevent false incentives and abuse in future.

However, the package of measures put forward is overloaded and goes too far. Compared with the report published by the Federal Council in April 2024, the number of new regulations has grown from 22 to 28. The applicability of measures concerning corporate governance has also been extended. We see no need for any changes in this area for most banks. In response to a crisis suffered by a single bank as a result of its own actions, a wave of regulation is set to be imposed on all banks. Many of the measures put forward have little to do with the causes of CS’s demise.

Extreme measures are harmful to Switzerland 

Some of the measures are misguided and threaten to weaken the financial centre and the Swiss economy as a whole in an environment of escalating geopolitical rivalries and increasing international deregulation. This is to be avoided at all costs. The proposed tightening of capital requirements for UBS, which is even more drastic than in the Federal Council’s report from 2024, is especially problematic. The new requirements are not aligned with any international standard and would become massively more onerous than those in other financial centres. The regulatory weakness that contributed to the downfall of CS lay not in insufficient capital adequacy requirements but in far-reaching exemptions from those requirements and in overinflated asset valuations. Abolishing those exemptions and using appropriate, reliable valuation methods would thus be a better response. 

Switzerland has overcome many crises in the past through a measured approach and targeted regulation. Even after the CS crisis, effectiveness and proportionality must remain the guiding principles. Proportionality means that differences such as size, risk profile, legal form and business model are consistently taken into account when determining future banking regulation. 

The Swiss financial centre, with its economic might and global profile, thrives on its diversity, and domestically oriented, private and foreign banks as well as the one big bank all have their place. This strength must be preserved, not weakened by a wave of regulation. 

The SBA will analyse the proposals presented today by the Federal Council in depth.