6
INTERNATIONAL MONETARY FUND
EXECUTIVE SUMMARY
Switzerland’s financial sector is one of the largest in the world, especially relative to GDP. It
is home to two of the largest banks, which are designated as globally systemically important
financial institutions (G-SIFIs), and one of the largest reinsurance companies. The two global banks,
account for 43 percent of Swiss banking sector deposits and 18 percent of capital; in addition,
there are 24 cantonal banks, one of which has been designated a domestically systemically
important financial institution (D-SIFI), as well as the newly licensed
Postfinance, a cooperative Raiffeisenbank, and small private and regional banks. The two global
banks––particularly UBS––were hard hit by the recent global financial crisis (GFC); the rest of the
banking sector emerged relatively unscathed.
In response to the GFC the Swiss authorities took forceful action. The single supervisor, the
Swiss Financial Market Supervisory Authority (FINMA), became operational in 2009. Capital
standards were raised above Basel minima and ahead of the Basel implementation timetable.
Additional capital buffers were imposed on the two large banks, and contingent capital
instruments (CoCos) introduced. Macroprudential instruments were analyzed, and at
end-September 2013 a countercyclical capital buffer (CCB) targeting residential property
mortgages took effect; an increase in the CCB was announced in January 2014, to take effect from
June 2014. The insurance industry became subject to the Swiss Solvency Test (SST).
Stress tests indicate that the banks are robust against even severe shocks. Banks have
increased their capital, and the two global banks have achieved substantial deleveraging. FINMA
has focused on significantly improving the quality of its supervision. That said, identification of
individual bank risk was hindered as legal constraints prevented the Swiss authorities from
providing regulatory data at the individual bank level. Hence the stress tests will not have served to
indentify outliers in performance.
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