FINANCIAL SECTOR OVERSIGHT
A. Banking
48. Switzerland has a unique supervisory process, which utilizes extensive resources of
audit firms on FINMA’s behalf. FINMA now has a high level of compliance with BCPs. The capital
adequacy framework is robust: Basel III rules have been adopted, and significantly higher
requirements are applied to TBTF banks. The licensing process is actively used, and the regime for
transfer of ownership is well developed. FINMA makes extensive use of its general corrective and
remedial powers to achieve prudential results. Consolidated supervision is of high quality, although
the legal framework in this regard should be enhanced.
49. FINMA’s use of external auditors is understandable, enabling it to lever its expertise
and take advantage of auditors’ global networks. FINMA has materially enhanced supervisory
processes and practices in the past three years to address identified deficiencies and approach the
new intensity expected post GFC. This enhancement requires audit firms to be more forward-
looking and effective in their work, adds capability for FINMA to do more supervisory work itself,
and intensifies FINMA interventions.
50. However, the enhancement process started only recently, leaving some areas where
BCP compliance remains weak. It requires heightened efforts in providing guidance to auditors,
validating their works, ensuring consistency, and dampening possible conflicts of interest.
Switzerland still has one of the most principles-based approaches to rules and guidance, remaining
considerably focused on capital and liquidity metrics, and less on qualitative elements of risk
management and internal controls. Further efforts are needed to enhance FINMA’s ability to assess
the quality and completeness of information coming from auditors and to put incentives on
auditors to perform in a more consistent manner.
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