Switzerland Advances Banking Act Reforms as FINMA Calls for Stronger Preventive Powers

Key Takeaways

• Banking Act Revision Gains Support: Swiss Financial Market Supervisory Authority backs the Swiss Federal Council’s proposed revisions as a step toward strengthening financial stability.
• Focus on “Too Big to Fail”: The reforms target capital requirements for systemically important banks, including renewed efforts to eliminate “double leverage” risks.
• Prevention Takes Center Stage: FINMA is pushing for stronger statutory powers, including early intervention tools, an accountability regime, and the ability to impose fines.
• Credit Suisse Lessons Still Loom: The reforms are framed as part of a broader effort to address weaknesses exposed by the Credit Suisse crisis.

Deep Dive

Switzerland’s financial watchdog has thrown its support behind a fresh push to strengthen the country’s banking rules, while making clear that lawmakers should go further to close gaps exposed by past crises.

The Swiss Financial Market Supervisory Authority said it welcomes the Swiss Federal Council’s newly adopted dispatch to revise the Banking Act, describing it as an important step toward reinforcing the stability of the financial system. But the regulator also urged that the measures outlined by the government be implemented in full, with particular emphasis on bolstering preventive powers.

At the heart of the proposal is a recalibration of Switzerland’s “too big to fail” framework, especially around capital requirements for systemically important banks. The Federal Council has set out plans to address what is known as “double leverage,” a structural issue where foreign subsidiaries are not fully backed by capital. The practice has been viewed internationally as a source of risk for more than 20 years, and Switzerland is now revisiting its removal for the second time since 2012.

That question, whether to fully eliminate double leverage, now sits with policymakers, who must weigh the interests of bank shareholders against the potential exposure of taxpayers.

For FINMA, however, the capital reforms are only part of a broader effort to future-proof the country’s financial system. The regulator stressed that the overall package of “too big to fail” reforms will be critical not just for stability, but for Switzerland’s long-term economic strength as a global financial center.

The watchdog pointed to a more complex and evolving risk landscape, where strong governance, a well-developed risk culture, and sufficient capital and liquidity buffers are essential at the institutional level. But just as important, it argued, are the legal tools that allow supervisors to act early—before risks escalate.

Over the past three years, FINMA has consistently called for an expansion of its statutory powers, many of which are reflected in both the Federal Council’s broader reform agenda and the findings of the Parliamentary Investigation Committee. Among the measures it continues to support are the introduction of an accountability regime, the ability to impose fines, and clearer authority to communicate publicly about concluded proceedings.

It is also pushing for stronger legal backing to intervene at an earlier stage, shifting supervision toward a more preventive model.

The urgency behind those proposals is rooted in recent history. The crisis surrounding Credit Suisse cast a long shadow over Switzerland’s regulatory framework, raising questions about whether existing tools were sufficient to detect and address risks in time.

FINMA framed the current legislative process as a chance to turn those lessons into concrete change. While the Federal Council’s bill focuses on strengthening capital requirements, the regulator signaled that its effectiveness will ultimately depend on whether the full set of proposed measures, particularly those aimed at prevention and accountability, are adopted without dilution.

In FINMA’s view, only a comprehensive approach will ensure that the vulnerabilities exposed in past crises are properly addressed, and that Switzerland’s banking system remains resilient in the face of future shocks.

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