Dossier: Too big to fail

A systemically important bank fulfils one or more key functions in the economy whose failure or unavailability would cause serious disruption to the financial system and have a knock-on impact on the real economy.

The ongoing work of the systemically important banks on their recovery and emergency plans was the main focus at FINMA in 2018.

Switzerland again played a leading role in 2015 responding to challenges related to financial institutions that are “too big to fail”. In October, the Federal Council decided to introduce higher capital requirements for global systemically important Swiss banks by the end of 2019 and to accelerate the implementation of emergency plans.

Further key measures to improve the resolvability of global systemically important banks were launched internationally in 2014. Credit Suisse Group and UBS are adjusting their group structures accordingly.

The FSB has been instructed by the G-20 to develop the total loss-absorbing capacity concept for global systemically important banks. A public consultation was launched in November 2014.

The core element of FINMA’s resolution strategy for globally active systemically important banks is that creditors should be compelled to bear a share of the losses. This bail-in reduces the implicit state guarantee and restores order to the market.