The Federal Council welcomes the introduction of a supervisory regime for senior managers of Swiss banks, citing perceived gaps in regulatory accountability. In fact, what is needed is not a new regulatory regime modelled on the British “senior managers regime”, but rather clarification and refinement of the current framework.
1) Introduction
Following the collapse of Credit Suisse, the idea of a “Senior Managers Regime” modelled on the British framework has gained considerable traction in Switzerland. The Swiss Federal Council and FINMA, among many others, have expressed support for such a regime, arguing that Swiss financial market law as it stands today does not allow to hold senior managers of Swiss banks accountable for regulatory breaches.
However, the assumption that the existing legislative framework fails to ensure adequate regulatory accountability warrants critical analysis based on a comprehensive review of the regime currently in place.
2) Attribution of Responsibilities Under the Existing Legal Framework
In Switzerland, the framework of duties, powers, and responsibilities of bank executives stems from an interplay between private and public law.
a) Private law
Swiss Banks are typically organized as stock corporations (Aktiengesellschaften) governed by the Swiss Code of Obligations (CO). The board of directors manages the stock corporation and may delegate powers to the management in accordance with organizational regulations. Importantly, such delegation only relieves the board from liability if executed with care in i) selection (cura in eligendo), ii) instruction (cura in instruendo), and iii) oversight (cura in custodiendo) (Art. 754 Abs. 2 CO).
Even so, the board retains inalienable responsibility for organizational design through its obligation to define the management structure and to establish clear lines of reporting, hierarchy, and accountability (Art. 716a CO). In particular, board members and other senior managers owe comprehensive duties of loyalty and care (Treue- und Sorgfaltspflicht) to the stock corporation (Art. 717 CO).
For board members of Swiss stock corporations (including banks) as well as, potentially, further persons in leadership roles, a clearly defined (or at least definable) bundle of tasks, responsibilities, and powers can thus be derived from: (i) law; (ii) articles of association; (iii) the organizational regulation; (iv) further directives; and (v) contractual arrangements.
b) Financial Market Supervisory Law
Beyond the obligations under private law, banks can only operate with a bank license. Approval by the Swiss regulator, FINMA, will only be granted if certain quantitative and qualitative requirements are met. These requirements are primarily set out in the Banking Act and the Banking Ordinance and detailed in FINMA circulars.
This legal framework prescribes strict requirements for the organizational structure of stock corporations seeking the authorization to act as banks, that aim at ensuring, inter alia, gapless allocation of responsibilities at the senior management level. In particular, banks shall be organized appropriately in order to ensure, inter alia, a clear allocation of responsibilities (FINMA Circular 2017/1 on Corporate Governance, para. 8a). As outlined above, the organization of banks is defined in private law instruments (articles of association, organizational regulations, etc.).
Further obligations relate to the persons assuming senior management roles at banks. In particular, senior managers who qualify as “Gewährsträger” must be fit and proper (Art. 3 Abs. 2 lit. a, c Banking Act; Art. 9 Banking Ordinance). This includes the members of the board of directors as “Oberleitungsorgan” as well as the bank’s management as “Geschäftsleitung”.
Changes in senior management roles require FINMA’s prior fit and proper assessment and approval and any organizational regulation must be up to date to reflect the bank’s organizational set-up (Art. 3 Abs. 3 Banking Act).
c) Enforcement of Individual Accountability
Under the existing framework, FINMA has powers to ensure compliance with the regulatory framework. In case a bank violates supervisory law requirements, FINMA may conduct enforcement proceedings against the bank as an institute.
While FINMA primarily supervises institutions, its enforcement powers extend to individuals. Supervisory law accountability can occur for both direct and indirect violations, i.e., a violation by a bank that is attributable to a senior manager. According to the practice of FINMA and the Swiss federal courts, the latter requires: (i) a violation of duty; (ii) a fault; and (iii) a causal link to a serious breach of financial market supervisory law by the bank. Importantly, relevant duties extend beyond Swiss regulatory law to include corporate law, organizational regulations, internal directives, and contractual obligations.
For serious violations (schwere Verletzungen), FINMA may, inter alia, impose professional bans (Art. 33 FINMAG) and confiscations (Art. 35 FINMAG) against senior managers. With respect to direct violations of corporate law and internal organizational law (without, at the same time, leading to violations by the institute and thus being indirect violations), a key distinction must be drawn between the senior managers who qualify as “Gewährsträger” and other senior managers: Breach of duties by “Gewährsträger” can constitute a violation of the fitness and propriety requirement and thus warrant supervisory sanctions against them, even in the absence of a simultaneous aggravated violation by the bank. This heightened standard currently does not apply to other senior managers.
d) Interim Conclusion
The existing legislative framework already provides for comprehensive attribution of responsibilities. Moreover, FINMA possesses adequate enforcement tools against individuals who breach such duties and has used them in practice.
3) Proposal of a “Swiss Senior Managers Regime”
The concerns voiced by FINMA regarding the practical difficulties in holding senior managers accountable should not be dismissed. In our opinion, such concerns are best addressed by amending FINMA’s Circular 2017/1 in order to introduce the duty for banks to issue two key documents.
a) Two Key Documents
The accountability of senior managers at Swiss banks could be strengthened by introducing the following two interconnected documents inspired by the British model:
1. Responsibilities Map (Verantwortlichkeitsübersicht): Banks shall maintain a comprehensive organizational responsibility map documenting the tasks, duties, responsibilities, and powers of all senior managers. The map must capture delegation arrangements, appointment and oversight procedures, reporting lines, and information flows, including responsibilities deriving from committee decisions.
2. Statement of Responsibilities (Pflichtenheft): Banks shall prepare an individual responsibility statement for each senior manager documenting all duties, responsibilities, and tasks. The statement must include committee-related responsibilities and clarify that each committee member bears individual accountability for their duties.
b) Implementation Level
In our view, it would be most appropriate to introduce the duty to issue the aforementioned two documents in a FINMA circular (Rundschreiben), i.e., a document in which FINMA communicates its expectations to market participants. An amendment of FINMA’s Circular 2017/1, which deals with corporate governance within banks, would be the most appropriate approach.
c) Reporting and Oversight
The bank’s board of directors as “Oberleitungsorgan”, which is responsible for appropriate organizational design, would remain responsible for ensuring compliance with the new requirements enshrined in FINMA’s Circular 2017/1. While it may delegate tasks in relation to the issuance of the two documents, it shall ensure that the bank’s regulation and internal rules always reflect the current state of duties and responsibilities of all senior managers. Changes must be reported promptly to auditors and FINMA.
4) Key Advantages of the Proposed Approach
The proposed framework would ensure that banks define responsibilities in a way that meets FINMA’s expectations. It would facilitate supervisory enforcement while protecting individual senior managers from potential sanctions for breach of unspecified duties – a senior manager shall not be held accountable for the breach of a duty that was not specifically allocated to them.
The suggested approach accommodates proportionate, risk-based implementation reflecting each institution’s business model and risk profile. It respects the principle that the banks themselves, and not FINMA, should define the appropriate organizational architecture. Further, it allows banks to build upon existing organizational structures without imposing disproportionate regulatory costs. Lastly, it does not require a lengthy legislative process and a costly implementation (the cost of which would largely be offset to clients).
5) Key Differences to the British Senior Managers Regime
a) No Regulatory Approval Mechanism for Managers
The British regime requires regulatory approval of senior managers.
Replicating the British model by requiring references of the last six years of professional experience of newly hired senior managers would not have any material benefit. Forcing FINMA to regulate potentially hundreds or thousands of individuals would create bureaucratic burden incompatible with the Swiss approach of a swift and effective financial market regulation.
It should be noted that Swiss law already requires FINMA to assess whether senior managers who qualify as “Gewährsträger” are fit and proper (Art. 3 Abs. 2 lit. cbis Banking Act). FINMA performs these assessments when the bank license is issued and when personnel changes occur. That is, in our view, sufficient.
b) No state-prescribed functions and mandated responsibilities
The British regime defines controlled functions (e.g., Chief Executive, Chief Finance) and responsibilities that must be allocated to said functions. Banks must comply with these strict allocation rules.
Switzerland, by contrast, traditionally leaves it to financial institutions to define their managerial structure. In our view, banks should retain discretion to define their senior managers and to implement accountability in accordance with their business model and risk profile. A system that has been widely described as complex and burdensome and that requires high compliance expenditures without proven added value should be avoided.
The British regime requires senior managers to take “reasonable steps” to ensure regulatory compliance in their allocated domain.
Swiss senior managers are already subject to extensive care duties under private law and must ensure all business decisions comply with applicable law. For senior managers qualifying as “Gewährsträger”, the fitness and propriety requirements impose an explicit regulatory compliance obligation. While other senior managers may not face identical regulatory duties, introducing a separate supervisory duty of care modelled on the British “reasonable steps” standard is unnecessary. Existing private law duties mandate appropriate delegation, instruction, and oversight, establishing a comprehensive accountability framework across all organizational levels. Senior management’s obligations under private and financial market supervisory law, together with mandatory responsibility documentation, achieve the same regulatory objectives without introducing new legal constructs.
6) Conclusion
Strengthening the accountability of senior managers of Swiss banks can be done in an efficient manner within existing legal boundaries. Instead of seeking to introduce a cumbersome new regime mirroring the British senior managers regime, FINMA should clarify, through targeted amendments of FINMA Circular 2017/1, its expectations regarding the ways in which banks shall ensure accountability of their senior managers.
This approach aligns with Switzerland’s principles-based regulatory philosophy, avoiding the prescriptive complexity of the British model. It preserves bank management’s responsibility for organizational design and accountability structures, subject to FINMA oversight.
Rather than transplanting foreign legal frameworks, the proposal enhances existing requirements through greater clarity and documentation. Comprehensive responsibility mapping, at both institutional and individual levels, enables FINMA and Swiss courts to readily identify accountable persons when violations occur.
Nicolas Curchod (nicolascurchod@quinnemanuel.swiss)
Dusan Ivanovic (dusan.ivanovic@swlegal.ch)