The Swiss Financial Market Supervisory Authority (Finma) has expressed concerns over the emergency plans of two of Switzerland’s major banks. The regulator has deemed Zürcher Kantonalbank (ZKB) and Postfinance unprepared for a possible financial crisis, stating that they may not be able to continue operating in such a scenario.
The two banks are among the five “systematically important banks” in Switzerland, with the others being Credit Suisse, UBS, and Raiffeisen. This evaluation is based on their crisis planning documents submitted in 2022 and evaluated at the end of the year.
While last year Finma viewed Credit Suisse’s emergency plan as ready to implement, the bank’s subsequent difficulties have shown the importance of concrete preparations for crises. Credit Suisse was rescued by UBS in a state-backed acquisition proposal, after it borrowed $54 billion from the Swiss National Bank in mid-March 2023, causing a record low in share prices.
Finma’s resolution report has also noted that for the first time, Raiffeisen’s emergency plan meets the requirements to be able to perform critical functions, even in the face of insolvency.
Finma CEO Urban Angehrn stated that the events surrounding Credit Suisse have shown the importance of crisis preparation and that there are important lessons to be learned. Finma will contribute to this objective, he said, and emphasized that the authority has been quick to react to the situation, while also asking for even more powers.
The regulator’s assessment indicates that ZKB and Postfinance need to realign their emergency recapitalization strategies, and ZKB needs to reserve sufficient capital for recapitalization before its emergency plan can be implemented.
