Switzerland’s financial regulatory authority, FINMA, has unveiled its comprehensive plan to closely scrutinize UBS, the country’s last remaining global systemic bank, in response to the significant concerns raised by UBS’s acquisition of Credit Suisse in 2023. The integration of Credit Suisse into UBS has heightened fears about the systemic risks associated with “too big to fail” lenders, prompting FINMA to take proactive measures to ensure effective supervision.
As part of its regulatory strategy outlined in its 2023 annual report, FINMA disclosed plans to conduct 40 on-site supervisory reviews of UBS’s operations both in Switzerland and abroad. Additionally, the regulator intends to conduct two in-depth stress tests to assess the bank’s resilience under adverse conditions. Thomas Hirschi, who heads FINMA’s banks division, emphasized the focus on evaluating UBS’s operational stability, capital adequacy, and liquidity management, particularly in the context of its integration with Credit Suisse.
The supervisory authority has identified several key areas of concern, including the operational challenges associated with the merger, the combined bank’s capital and liquidity planning, and the effectiveness of UBS’s recovery and emergency preparedness post-merger. By conducting rigorous reviews and stress tests, FINMA aims to address these risks comprehensively and ensure that UBS operates in a safe and sound manner.
Despite facing criticism for its oversight of Credit Suisse during its recent turmoil, FINMA remains committed to strengthening its supervisory capabilities. The regulator believes that additional tools and resources will enable it to fulfill its mandate more effectively and consistently.
In its assessment of the broader banking sector, FINMA highlighted significant shortcomings in areas such as anti-money laundering measures, mortgage lending practices, and cybersecurity resilience. The regulator called on banks to promptly address these deficiencies to enhance their risk management frameworks and safeguard the stability of the financial system.
Meanwhile, the Swiss National Bank (SNB) has also underscored the need for regulatory reforms to reflect UBS’s heightened systemic importance following its acquisition of Credit Suisse. The SNB has advocated for strengthening bank capital regulations and preparing contingency plans for the resolution of systemically important banks to mitigate the risk of future crises.
In 2023, FINMA conducted a total of 732 investigations and concluded 27 enforcement proceedings against companies and individuals. With regard to banking oversight, the regulator conducted 96 on-site supervisory reviews, including in-depth examinations and deep dives, to ensure compliance with regulatory requirements and mitigate potential risks in the financial sector.