FINMA can look back on 2010 as a challenging year in which both economic conditions and the operational development of the supervisory authority, which employs around 400 staff, continued to demand a great deal of attention. In addition to presenting its annual report and financial statements for 2010, at today's annual media conference FINMA also emphasised the challenges and risks which the current low interest rate environment poses for the stability of the financial sector. In addition, the media conference focused on the national and international debate on banking regulation which has been going on since the financial crisis, against the backdrop of the "too big to fail" issue and the "Basel III" reform package drawn up by the Basel Committee.
Last year, FINMA began the work of implementing its seven strategic goals approved by the Swiss Federal Council in all areas. FINMA's efforts centred in particular on improving the effectiveness and efficiency of its supervisory activities, strengthening resistance to crisis, and protecting creditors, investors and policy holders.
Supervisory activities geared more closely to risk
In order to strengthen its effectiveness and efficiency, FINMA developed a consistent and strict risk-based approach to all areas subject to its supervision. This means that FINMA's limited supervisory resources are deployed where the greatest risks lie for creditors, investors and policy holders. Prof. Anne Héritier Lachat, Chair of the Board of Directors, explains: "In addition to its supervisory work, in 2010 FINMA also pushed forward with developing its own operations. The first benefits of integration are already making themselves felt, notably in the form of improved internal collaboration. Through organisational measures, harmonised procedures and targeted recruitment, the efficiency and professional skill of the authority were strengthened in 2010, while the process of integration was taken to the next stage."
Enhancing awareness of interest rate risks
As part of its task, FINMA undertook a number of measures last year to mitigate the risks entailed in an expansionary monetary policy involving low interest rates for a protracted period. Of particular importance at the moment is the issue of interest rate risk for mortgages and life insurance. As FINMA CEO Dr Patrick Raaflaub emphasised in his presentation, "Prudential supervision can only have a limited impact on some of the risks. However, FINMA will be keeping a close eye on interest rates and will play an active role in making everyone involved more aware of the issues arising from low interest rates."
Active FINMA involvement in the "too big to fail" Commission of Experts
After the financial crisis had exposed failings in regulation, a particular focal point for FINMA in 2010 was its strategic goal of finding appropriate regulatory responses to systemic risks in the Swiss financial sector. FINMA was therefore actively involved in the "too big to fail" Commission of Experts appointed by the Swiss Federal Council, aimed at limiting the economic risks posed by large companies. FINMA regards it as necessary that the proposals to mitigate the “too big to fail” issue in terms of capital, organisation, liquidity and risk diversification be implemented swiftly and in their entirety. FINMA was confident that Basel III and the proposed “too big to fail” regime were a necessary and appropriate response to the conclusions drawn from the financial crisis.
Strengthening resistance to crisis and enhancing protection of creditors, investors and policy holders
Working closely with the Swiss National Bank, FINMA drew up a new liquidity regime for the large Swiss banks last year, which entered into force on 30 June 2010. FINMA also derived specific measures from regulatory proposals in the international context, particularly from the Basel Committee's reform package; measures are being introduced earlier in Switzerland than at international level in relation, for instance, to market risk rules and securitisations. Mark Branson, Head of Banks Division: "Switzerland has in several respects played a pioneering role in the international debate about banking regulation, particularly with regard to quantitative and qualitative capital requirements".
In the area of insurance, the Swiss Solvency Test (SST) entered into full force on 1 January 2011. The SST is based on market-consistent valuation, risk-based capital requirements and a full economic balance sheet. It constitutes a modern solvency monitoring system and makes a key contribution to ensuring stability and transparency for insurers and thereby protecting policy holders. In a position paper in 2010, FINMA also set out what it expects from supervised institutions in the way they deal with legal and reputational risks in cross-border financial services. And, not least, 2010 saw FINMA stepping up the fight against illegally operating financial intermediaries and acting to improve public awareness of the dangers presented by fraudulent operators.
Annual financial figures within budget
FINMA's annual financial statements, prepared according to IFRS, are within the 2010 budget approved by the FINMA Board of Directors. FINMA's net income for 2010 amounted to CHF 100,296 million (previous year: CHF 93,379 million), of which CHF 84,080 million (previous year: CHF 82,015 million) result from supervision charges. The level of receipts from fees levied reflects a desired shift towards the allocation of supervisory costs to supervised institutions based on where the costs arise. Operating costs for the 2010 financial year amounted to CHF 91,109 million (previous year: CHF 84,784 million); staff costs, at CHF 70,923 million compared to CHF 62,379 million for the previous year, were higher because of planned and targeted staff recruitment.
Contact
Tobias Lux, Media Spokesperson, Phone +41 (0)31 327 91 71, tobias.lux@finma.ch.
