the recommendations of the CEP to the Federal Council

In its report, the Parliamentary Commission of Inquiry (CEP) addresses 20 recommendations to the federal authorities. Here they are.

The Parliamentary Inquiry Commission (CEP) is drawing lessons from the Credit Suisse crisis. In her report published Friday, she addresses 20 recommendations to the Federal Council and submits six postulates, four motions and a parliamentary initiative. Here are the main points:

More power at FINMA

The CEP wants to give more power to FINMA. According to her, supervision of the review of large banks should be centralized under the authority of the Financial Market Supervisory Authority. The latter should also be able to effectively enforce its enforcement procedures (law enforcement). It should be able to communicate in principle on each enforcement procedure against systemically important banks. FINMA should also be able to impose fines on large banks and order them to carry out early capital planning.

FINMA and the Review Supervisory Authority (ASR) must intensify and improve their collaboration and exchange of information. It is also necessary to clarify the concept of “creditor protection” and when FINMA must contact the Competition Commission (COMCO).

Transparency of inspections

The Federal Council must increase transparency and understanding of the inspections carried out by the Audit Supervisory Authority (ASR) of systemically important banks. The CEP calls for more dynamic inspections, both in terms of frequency and scope. The ASR must rigorously verify the implementation of corrective measures.

Législation Too Big To Fail

TBTF legislation is too focused on Switzerland. In future regulations, the Federal Council is invited to take into account the international dependencies of systemically important banks. It will also have to consider the relatively large size of UBS, the last systemically important bank globally in Switzerland.

Capital relief

Relief from capital and liquidity requirements for large banks should be limited. The Federal Council is asked to examine whether the quality and quantity of the capital of systemically important banks are, in accordance with current requirements, sufficiently protected to ensure the soundness of systemically important banks.

Compensation systems

The Federal Council is responsible for examining what measures are necessary to ensure that the remuneration systems of the big banks and the dividends they pay do not induce harmful incentives. So-called variable remuneration (performance bonus) in particular should not be paid in the absence of commercial success.

Jurisdiction of the SNB

The Federal Council is responsible for adapting the legal basis so that the Swiss National Bank has the authority to impose preparatory measures on systemically important banks for possible recourse to extraordinary liquidity assistance.

Risk management

We must improve the early detection of crises, according to the CEP. It recommends examining the possibility of strengthening the role of the Conference of Secretaries General (CSG), the body which bears primary responsibility for risk management.

The Federal Council is invited to examine what appropriate and internationally coordinated measures can be taken in the event of a digital bank run.

Information exchange

The CEP considers it necessary to improve the exchange of information between the different bodies. The Federal Department of Finance (FDF) and the Swiss National Bank (SNB) must proactively inform each other about important developments relating to systemically important banks and their impact on financial stability.

For cases that concern several authorities, the responsibilities of the different actors must be clearly defined and a main contact must be designated for contacts with external actors. When transferring power to the Federal Council, the process must go beyond a checklist.

Responsibility and power of shareholders

The CEP asks to examine the advisability of developing legal bases aimed at better taking into account the responsibility of systemically important financial institutions with regard to the Swiss economy and taxpayers. The postulate cites as an example the obligation of residence in Switzerland for at least 10 years for the majority of the board of directors.

The CEP ultimately proposes to strengthen the power of shareholders of large, systemically important companies. (ats)

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