The Federal Department of Finance recently published different proposals with respect to new rules on capital adequacy for Swiss banks, including detailed provisions aimed at mitigating the too-big-to-fail conundrum. The suggested changes strive to raise both the quality and quantity of the regulatory capital base and enhance the risk coverage of the capital framework. Whereas overall the proposed changes are welcomed insofar as they are aimed at implementing the new capital adequacy rules of the international Basel III framework, some amendments are criticizable as they would result in stricter requirements for Swiss banks than required under Basel III for no apparent good cause. In addition, the stricter capital adequacy rules for systemically important banks seem to depart from the final report of the expert commission with respect to a number of important points and, if implemented, may put significant constraints on Switzerland’s two large banks.

On 16 January 2012 the Swiss Financial Market Supervisory Authority FINMA has opened the consultation on the global revision of the Banking Insolvency Ordinance FINMA (BIO-FINMA). The revision becomes necessary due to the following amendments to the Banking Act:

The proposed draft of the BIO-FINMA shall implement more detailed provisions in particular with respect to restructuring proceedings and the restructuring plan in line with the amendments stemming from both bills mentioned above. As the new BIO-FINMA applies to all banks and securities dealers, the FINMA Bank Bankruptcy Ordinance of 30 June 2005 is to be renamed Ordinance on the Insolvency of Banks and Securities Dealers.

A novelty proposed under the BIO-FINMA is that in an insolvency case it will no longer only be possible to restructure the entire bank, but FINMA can also ensure that important individual banking services are transferred to other legal entities with the goal to protect the financial system and the Swiss economy. In order to raise the capital required for a restructuring, the bank shall be given new contractual instruments: in particular, it will be able to trigger debt-to-equity swaps and statutory bail-ins. The BIOFINMA shall further provide that in certain cases, FINMA may also temporarily suspend existing contractual termination rights of the bank’s counterparties. Other changes aim to result in quick and efficient proceedings, tailored to the relevant case.

The proposed amendments derive to a large extent from the international rules issued by the Financial Stability Board.

The consultation period has ended on 2 March 2012.

In January 2012 FINMA announced that it sanctioned a Swiss insurance company and its directors for their improper behaviour relating to an employee participation program in connection with a contemplated merger with another Swiss health insurance carrier. This article discusses the cause for this decision and its legal foundations.