Switzerland: Financial System Stability Assessment
IMF Staff Country Reports, June 26, 2019
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- Switzerland: Financial System Stability Assessment
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Bibliographic details
- Published: June 26, 2019
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498321662.002
Key findings on resilience and vulnerabilities
- Swiss financial institutions are well capitalized and could withstand the severe shocks under the adverse stress test scenarios.
- Macrofinancial vulnerabilities are deepening.
- Important reforms have been made since the 2014 FSAP, but several critical recommendations and emerging challenges have yet to be fully addressed.
- Capital buffers have increased across all categories of banks.
- The two global systemically important banks have downsized and deleveraged significantly since the global financial crisis, but since 2013 they have been growing again.
- Macroprudential measures have not been taken since 2014 and are constrained by having only one mandated tool and a self-regulation agreement with banks.
- The financial supervisor (FINMA) has developed into a trusted supervisor, but as a small entity, it relies heavily on external auditors to conduct on-site supervision; the associated conflict of interest and supervisory objectivity risks need to be carefully managed.
- The combination of an ex-post funding mechanism, a low cap on banks’ contributions, and a private deposit insurance agency run by active bankers weakens the crisis management arrangements.
Analysis of supervisory and crisis-management arrangements
- Supervisory capacity:
- FINMA has gained trust as a supervisor but is small and dependent on external auditors for on-site supervision.
- Reliance on external auditors introduces conflict of interest and supervisory objectivity risks that need active management.
- Crisis management weaknesses:
- The funding mechanism for crisis resolution is ex-post.
- There is a low cap on banks’ contributions to resolution funding.
- Deposit insurance is provided by a private agency run by active bankers, which weakens overall crisis management credibility.
Policy implications and recommendations (implied by findings)
- Address outstanding critical recommendations and emerging challenges identified since the 2014 FSAP to reduce macrofinancial vulnerabilities.
- Broaden macroprudential policy tools beyond the single mandated tool and reconsider reliance on a self-regulation agreement with banks to enable proactive measures.
- Reduce reliance on external auditors for on-site supervision or strengthen safeguards to manage conflict of interest and preserve supervisory objectivity.
- Reform crisis management arrangements to strengthen funding (considering ex-ante mechanisms), revisit the cap on banks’ contributions, and reassess the governance of deposit insurance to avoid conflicts from active banker management.
International Monetary Fund. Monetary and Capital Markets Department "Switzerland: Financial System Stability Assessment", IMF Staff Country Reports 2019, 183 (2019), accessed 9/5/2026, https://doi.org/10.5089/9781498321662.002
Content in this bundle
- EXECUTIVE SUMMARY AND KEY RECOMMENDATIONS