Swiss Regulator FINMA Calls for Remediation as UBS Faces Scrutiny Following Credit Suisse Merger

Swiss financial regulator FINMA has released a comprehensive assessment today (Wednesday), highlighting significant deficiencies within the country's banking sector, particularly in areas such as money laundering, mortgage lending, and cyber risks. Urging swift remediation, FINMA emphasized the imperative for affected banks to address these issues without delay.

In response to the heightened concerns arising from UBS's acquisition of rival Credit Suisse in 2023, FINMA has announced plans for intensified oversight. This includes the undertaking of 40 reviews and two stress tests on UBS throughout the year. The acquisition has raised apprehensions regarding the concentration of systemic risk among major banks, prompting FINMA to lay out regulatory plans for managing the country’s last remaining global systemic bank in its 2023 annual report. Thomas Hirschi, head of FINMA's banks division, elaborated on these plans, stating, “Forty on-site supervisory reviews are planned at UBS in Switzerland and abroad, as well as two in-depth stress tests this year.”

The focus of FINMA's supervisory activities encompasses the risks associated with UBS’s integration of Credit Suisse, prioritizing aspects such as operational stability, capital, and liquidity planning. Additionally, FINMA will critically evaluate UBS’s post-merger recovery and emergency planning.

Despite facing criticism for its supervision of Credit Suisse amidst recent challenges, FINMA has defended its role in managing the fallout. The regulator’s oversight has been pivotal in navigating the aftermath, culminating in one of the most significant bank rescues since the 2008-2009 global financial crisis.

In tandem with FINMA’s actions, the Swiss National Bank (SNB) has advocated for a comprehensive overhaul of bank capital regulations. Recognizing UBS's increased systemic importance post-acquisition, the SNB emphasized the need to fortify banks’ financial positions to avert future crises. Furthermore, the SNB underscored the importance of preparing a diverse range of resolution options for systemically important banks.

These initiatives underscore the concerted efforts by regulatory authorities to bolster the stability and resilience of Switzerland's banking sector. Amidst significant mergers and evolving systemic risks, regulatory bodies like FINMA and the SNB are actively working to enhance oversight and safeguard the integrity of the financial system.

By fLEXI tEAM