Updated: Sept. 10, 2012 (Initial publication: Sept. 3, 2012)

Breaking news

In Switzerland on 28 August 2012, the "Département Fédéral de Finance" (Swiss Federal Department of Finance) opened the work on the draft ordinance on the obligations of banks' liquidity.


Before the rules called Basel III shall apply in Switzerland in 2015, the "Département Fédéral de Finance" (Swiss Federal Department of Finance) of the "Conseil Fédéral Suisse" (Swiss Federal Council) has developed a draft of an ordinance that was subject to public consultation on August 28, 2012. Another text will present later rules about systemic banks. The order will be applicable on the 1st January 2013. But banks, like any anticipator market agent, have not already internalized the rules of Basel III ? In addition, it seems that the criterion of systemic continues to be the size of the agent, but it is not so evident.

© thejournalofregulation

The "Département Fédéral de Finance" (Swiss Federal Department of Finance), the "Service du Conseil Fédéral suisse" (Swiss Federal Council service), opened on August 28, 2012 a public consultation on a draft ordinance, which content will organize liquidity requirements of banks from 1st January 2013, before that the device is relayed by the application of Basel III from 1st January 2015.

According to these requirements, banks are required to control and monitor their liquidity risks appropriately. Banks must include organizational measures and have liquidity reserve consisting of unencumbered assets, high quality and easily achievable. They should perform stress tests and prepare a contingency plan to cope with any liquidity shortage. The requirements apply to all banks and involve taking into account the nature, scale and complexity of the activities, as well as risk.

During this time, therefore, the banks involved in the Swiss legislation which is intended to be adopted shall be subject to liquidity obligations stronger or weaker depending on their size (Switzerland includes two systemic banks), the text size and binding systemic nature of the institution. These systemic banks will be also concerned by a specific text, which will be developed later.

Finally, banks should have in place contingency plans always activated in the event of crisis.


To observe things "flat", it seems exemplary, Switzerland ahead and call, apply Basel III before 2015, identifies specific regulations for systemic banks on both the bottom (liquidity ratios) and form (liquidity reports to the Federal Authority for The "Autorité fédérale de surveillance des Marchés Financiers - FINMA

 (Financial Market Supervisory Authority) .

But markets are anticipators, including against regulations. Thus, Basel III is already used by banks, regardless of its date of entry into force. This is the word that makes procurement law and not the date drawn by the pen of the legislator.

Secondly, the heart of the reflections are systemic operators and draw immediate consequences that they need to be managed by special legislation (bonds and equity). If we think so, this supposes, as it is to prevent and manage systemic risk, to identify the systemic agent, or super-systemic, then it must move from Regulation to supervision.

But who showed that the systemic character is related to the size of a business, in a system that is based on trust? For the moment, no demonstration was solidly done.

The legislator should probably remember Portalis’ advice who wrote that we should legislate with "the pen trembling".

To prevent systemic risks due to major banks, the ordinance includes quantitative requirements specifically applicable to systemically important institutions. These requirements stem from the agreement on the allocation of cash spent in June 2012 between FINMA and the two big Swiss banks. They replace for the concerned banks the general requirements who should satisfy all banks in liquidity.

your comment