Only two of the five Swiss systematically important banks – UBS and Credit Suisse – have passed the crisis planning test of FINMA with effective plans.
The five banks had a deadline of 2019 to submit their emergency plans on how to maintain essential services during a crisis situation without taking the help of public funds.
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These essential services include domestic deposit and lending businesses and payment services, among others.
FINMA CEO Mark Branson said: “Implementation of the Swiss too-big-to-fail regime is critically important to the stability of the financial centre.”
Following a review of the plans, the Swiss financial regulator conceded that only UBS and Credit Suisse had plans that could be effective in tackling a crisis situation.
Credit is said to have a “credible” plan in place though in the case of UBS, the regulator highlighted some excessive liabilities.
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By GlobalDataCredit Suisse CFO David Mathers said: “Defining a global resolution approach, addressing capital requirements and implementing structural and operational enhancements has been key to our Too Big to Fail agenda.
“Also, Credit Suisse has done pioneer work in the area of the bail-in mechanism, the new international standard to bank resolution. As of 4Q19, Credit Suisse has CHF91.3bn total loss-absorbing capacity (TLAC) with total balance sheet assets of CHF787.3bn.”
However, the contingency plans of the other ‘too big to fail’ banks in the country, namely PostFinance, Raiffeisen and Zürcher Kantonalbank, are not up to the mark, the watchdog said.
The regulator was particularly unhappy with the level of preparedness of PostFinance and Raiffeisen. The pair failed to present plausible plans for a crisis scenario.
Zürcher Kantonalbank lacked an effective Swiss emergency plan but hade a “plausible plan.”
