Systemic Swiss Banks Not Ready for Crisis, Regulator Says

Switzerland’s financial regulator is not satisfied with the emergency plans of two of the Alpine nation’s five major banks. The assessment refers to a period prior to the rescue of Credit Suisse by UBS when the authority viewed the troubled giant’s preparedness in positive terms.

2 Swiss Banks Unable to Implement Recovery Plans, Finma Finds

The Swiss Financial Market Supervisory Authority (Finma) considers insufficient the crisis plans of two of Switzerland’s main banks, Reuters reported. The regulator is not certain if Zürcher Kantonalbank (ZKB) and Postfinance will be manage to continue to operate in case of a crisis.

ZKB’s emergency plan is not yet ready to implement as the bank has not reserved sufficient capital for recapitalization while Postfinance “must realign its emergency recapitalization strategy,” Finma stated in an announcement on Wednesday.

The two are among the country’s five “systematically important banks,” along with Credit Suisse, UBS, and Raiffeisen. The assessment is based on their crisis planning documents submitted in 2022 and evaluated at the end of the year. It does not take into account the merger of Credit Suisse and UBS.

In mid-March, Credit Suisse shares dropped to a record low amid loss of investor confidence. The bank borrowed $54 billion from the Swiss National Bank and UBS came to its rescue with a state-backed acquisition proposal. Last year, Finma still viewed its emergency plan as ready to implement.

Finma CEO Urban Angehrn commented that the events surrounding Credit Suisse show how important it is to make concrete preparations for crises. “The authorities had options on the table with the restructuring plan and with the emergency plan that simply did not exist 10 years ago,” he pointed out while also emphasizing:

It is clear that there are important lessons to be learned from the Credit Suisse crisis for future crisis preparations.

Finma will contribute to this objective, Angehrn insisted. His statements come after the regulatory body rejected accusations for the problems at Switzerland’s second-largest bank. Its representatives insisted that their reaction has been quick and asked for even more powers.

In its Resolution report, the authority also noted that for the first time Raiffeisen’s emergency plan meets its requirements to be able to perform critical functions even it was facing the risk of insolvency. “Raiffeisen can provide sufficient capital to be recapitalized and continue in the event of a crisis,” Finma concluded.

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