FINMA Urges Legal Reforms to Strengthen Banking Resilience Amid Global Uncertainty

Switzerland’s financial regulator, FINMA, highlighted the critical role of prevention and technology in shaping the future of the banking sector during its annual media conference, amid persistent global uncertainty driven by crises in COVID-19, Ukraine, and Iran. While external shocks pose significant challenges, FINMA argues that Switzerland can mitigate risks through proactive internal resilience measures, particularly in financial stability. The regulator underscored that no single solution suffices—rather, a multifaceted approach combining capital, liquidity, and governance reforms is essential. The lessons from the 2008 financial crisis remain relevant, but the Credit Suisse collapse demonstrated that capital and liquidity alone are insufficient if governance and risk culture are compromised. Addressing this, FINMA has intensified enforcement actions, restoring compliance in 90% of cases within three months. However, in persistent non-compliance cases, the regulator faces legal limitations, prompting calls for legislative amendments to introduce preventive tools, such as legally binding responsibility frameworks and transparent enforcement transparency. These proposals were first raised in 2023 and gained support in reports from the Swiss Financial Market Supervisory Authority (SIF), the TBTF and PInC committees, and the Federal Council’s 2025 parameters. Currently, FINMA’s enforcement tools—including licence withdrawals and industry bans—are supplemented by fines and transparency reporting, but the regulator argues these are insufficient for addressing systemic failures. The focus is on serious breaches, with enforcement actions reviewed by courts in relevant cases. FINMA’s inspection frequency reflects its proportional approach: UBS, for instance, faces over 40 inspections annually, while smaller banks experience inspections every 8–10 years. The regulator also imposes stricter requirements on large banks’ corporate governance guarantees, though smaller institutions face fewer checks. Despite this, FINMA rejects the notion that size exempts institutions from scrutiny, emphasizing proportionality as a core principle. Regarding capital buffers, FINMA reiterated that while buffers are politically contentious, they are critical for navigating volatility. The debate over eliminating “double leverage” (debt-financed equity) remains unresolved, with FINMA noting that the issue predates the Credit Suisse crisis and is a matter for legislative balance. In a broader context, FINMA highlighted Switzerland’s leadership in small-bank regulation and proportional supervision, positioning the country as a pioneer in adapting regulatory frameworks to evolving risks. The regulator also underscored the transformative potential of technology, stressing that digital innovation will be pivotal in shaping the future of the financial sector, particularly in enhancing resilience and efficiency. The speech concluded by emphasizing that while responding to past crises is vital, proactive measures—such as legal reforms and technological adoption—are equally essential for long-term stability.