Banking regulation above all serves to protect bank clients and the safety of the financial system or, in today's parlance, its stability. In this sense, when setting regulatory goals priority is given to the protecting of creditors on the one hand and the improvement of the system stability on the other. Regulatory intervention can take the form of "preventive" regulation such as putting limits on risk (e.g. setting capital requirements for banks) or "curative" regulation such as damage limitation (e.g. depositor protection). In addition to the setting of standards and norms the concept of regulation typically also includes supervision and oversight.
Banking and financial market regulation can be expressed in various legal forms. In Switzerland, the fundamental principles are codified in federal legislation (e.g. in the Banking Law, the Law on Financial Market Supervision) while detailed contents are set out in government ordinances (e.g. in the Banking Ordinance). In addition, there are ordinances and circulars issued by Swiss Financial Market Supervisory Authority (FINMA) as well as self-regulatory directives, guidelines and recommendations issued by the financial sector itself, in particular our association. In Switzerland the main organ responsible for the regulation of banks and financial markets is the FINMA which functions as an independent federal regulatory authority. Under a dualistic supervisory system the FINMA commissions auditing companies to carry out the actual inspection and auditing of the banks.
Since 2008, various aspects of banking regulation have been subjected to critical examination within the context of the financial and economic crisis. At international as well as at national level, a number of regulatory requirements have been tightened. Areas such as capital and liquidity requirements (Basel III and the “Too Big To Fail” package), depositor protection, accounting standards and remuneration systems are at the centre of this discussion.
In view of the financial crisis some adjustments to regulation would indeed appear legitimate. However, it is above all important to carry out a cost-benefit analysis of any regulatory changes so the pros (benefits) can be weighed up and judged against the cons (costs). In this process any revision of individual regulatory instruments should not be done in isolation; the effects of any regulatory change must be considered holistically; interdependencies and interactions must also be factored into the equation. Furthermore, in many areas of regulation – for example with regard to capital requirements and remuneration systems – Switzerland already exceeds established international standards and this phenomenon must also be taken into account. Finally, given the extraordinary heterogeneity of the Swiss banking sector it is especially important that Swiss banking regulation be imbued with a high degree of differentiation ("one size does not fit all").
In the day-to-day work of the Swiss Bankers Association the area of banking regulation is an important area of focus. Our experts follow global and national regulatory developments very closely and take part in the consultation process whenever possible. One of our priorities is to make sure that banking regulation in Switzerland is structured in a good, credible and internationally-competitive manner.
More information on regulation can be found on the websites of the Basel Committee on Banking Supervision (www.bis.org); the Swiss National Bank (www.snb.ch); and the Swiss Financial Market Supervisory Authority (www.finma.ch)
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