Licensed banks and securities dealers are supervised by FINMA. Supervision aims at protecting creditors and maintaining the stability of the financial system. It thus centres on ensuring that licensing, as well as other legal and regulatory requirements are met at all times.
The regulatory framework for supervision includes the Financial Market Supervision Act (FINMASA), the Banking Act (BA), the Stock Exchange Act (SESTA) and their implementing provisions. Additional details are set out in FINMA circulars. Further, there is self-regulation within the sector, one example being the guidelines issued by the Swiss Bankers Association.
FINMA has limited human resources and thus follows a risk-oriented supervisory approach focusing on institutions that require greater attention owing to their risk profile. All licensed banks and securities dealers are assigned to supervisory categories. Every institution also undergoes a dynamic rating process. The supervisory category and rating determine the intensity of supervision.
FINMA has a variety of supervisory instruments at its disposal, some of which it applies itself on site. It also relies on audit firms licensed by the Federal Audit Oversight Authority to execute some of the direct supervision workload by conducting periodic regulatory audits under contract to supervised institutions and in line with FINMA requirements.
Institutions that form an economic unit with other companies active in the financial sector are additionally subject to consolidated supervision that takes account of the entire financial group’s risks so as to be able to identify their potential impact on a licensed institution and order appropriate measures.
When shortcomings arise and licensed institutions break the rules, FINMA orders appropriate measures to enforce supervisory law.