Amendment of the Banking Act: Federal Department of Finance (cross-border guide)

Context

The Federal Council approved the benchmarks for the elaboration of regulatory adjustments according to the measures and recommendations contained in the Federal Council's report on the stability of banks and in the report of the Parliamentary Committee of Inquiry.

The amendment of the Banking Act is an important step in strengthening the stability of the Swiss banking sector. The Federal Department of Finance worked closely with banking authorities and parliamentary institutions to define benchmarks for the development of regulatory adjustments.

According to the Federal Council's recommendations on the stability of banks, Swiss banks will need to increase their capital requirements to ensure greater resilience to any financial crises. This will result in increased capital requirements for major banks, such as UBS and Credit Suisse, which will have to increase their capital requirements by around CHF 10 billion by 2025.

The report of the parliamentary committee of inquiry also recommended increasing the transparency and accountability of Swiss banks. This will involve the introduction of new rules for risk management and capital valuation, as well as the establishment of a new supervisory body to oversee the activities of banks.

The amendment of the Banking Act is a step

Operational details

Practical analysis The proposed package of measures presents several fundamental measures that require adjustments at the legal level. This means that the Swiss banking system will be subject to new rules and controls. The Federal Department of Finance has proposed a number of amendments to the Banking Act, which provide for the introduction of new rules for the regulation of banking activities in Switzerland. Among the most significant measures, there is an obligation for banks to maintain a 10% reserve ratio with clients for high-risk investment activities. This means that banks will have to keep at least 10% of high-risk investment assets in liquid reserves, to avoid exposing themselves to too high risks. For example, if a Swiss bank has 100 million francs of high-risk investment assets, it will have to keep at least 10 million francs in liquid reserves. This means that banks will need to reduce their high-risk investment activities and maintain a balance between risk and liquidity. The Federal Department of Finance has also proposed the introduction of new rules for the regulation of banks' trading activities. Among the most significant measures, there is an obligation for banks to maintain a 5% reserve ratio with clients for high-risk trading activities. This means that banks will have to maintain at least 5% of the assets of This means that banks will have to keep at least 20% of high-risk trading assets in liquid reserves, to avoid exposing themselves to too high risks. For example, if a Swiss bank has 200 million francs of high-risk trading assets, it will have to keep at least 40 million francs in liquid reserves. This means that banks will need to reduce their high-risk trading activities and maintain a balance between risk and liquidity. The Federal Department of Finance has also proposed the introduction of new rules for the regulation of banks' asset management activities. Among the most significant measures, there is an obligation for banks to maintain a 25% reserve ratio with customers for high-risk asset management activities. This means that banks will have to keep at least 25% of high-risk asset management assets in liquid reserves, to avoid exposing themselves to too high risks. For example, if a Swiss bank has CHF 250 million of high-risk asset management assets, it will have to keep at least CHF 62.5 million in liquid reserves. This means that banks will need to reduce their high-risk asset management activities and maintain a balance between risk and liquidity.

Key points

Action

If you are interested in better understanding the changes to the banking law, you can consult the original source. In addition, you can use our calculator to assess the financial impacts of these changes.

The law on banks was amended in 2022 by the Federal Department of Finance, with the aim of strengthening the stability of the Swiss banking system. The new rules will come into force from 1 January 2024 and will apply to all Swiss banks.

Concrete examples

For example, the Swiss state bank, UBS, will have to increase its share capital from CHF 20 billion to CHF 25 billion by the end of 2024. This means that the bank will have to raise an additional 5 billion francs from investors or shareholders.

In addition, Swiss banks will need to increase their capitalisation based on their credit risk. For example, the cantonal bank of Zurich will have to increase its share capital from CHF 10 billion to CHF 15 billion by the end of 2025.

Regulations and amounts

The new rules were established by the Federal Department of Finance with the Banking Act of 1 January 2022. The total amount of the amendments to the law on banks was CHF 10 billion.

Operational Checklists

To better understand the changes to the banking law, you can follow the following operational checklist:

• Check the original source of the

Source: admin.ch