Background - 05.09.2025 - 08:30
Following the events surrounding the merger of UBS and Credit Suisse in March 2023, the regulation of large banks in Switzerland is once again in focus. In June 2025, the Federal Council adopted a package of measures that strengthens crisis planning for systemically important institutions, tightens capital and liquidity requirements, and expands supervision by FINMA.
This week, experts commented on the plans. HSG Professor Seraina Grünewald also participated in the conference in Zurich. We spoke with her about it.
Ms Grünewald, following the CS crisis and the banking regulation rules now proposed by the Federal Council, how stable is the Swiss banking system today?
The Swiss banking system is stable and well positioned overall. This is partly because Switzerland, unlike the US and the EU, has implemented the international standards for bank capitalisation, known as Basel III, in full and on schedule. The CS crisis was an isolated case, but one that could be repeated and that damaged confidence in the Swiss financial system. That is why the right regulatory conclusions must be drawn from the crisis.
Where do you see the most urgent need for action? The Federal Council wants to tighten crisis planning, strengthen FINMA, and introduce clear resolution rules. Is the Federal Council heading in the right direction?
The package of measures proposed by the Federal Council is a step in the right direction.
In my view, two things are crucial: firstly, FINMA must be able to intervene early and in a targeted manner in a bank whose governance is deficient and whose management repeatedly makes serious mistakes. This requires clear rules that guarantee legal certainty for FINMA and the bank.
Secondly, in our market economy system, it must be ensured that banks whose bankruptcy jeopardises financial stability and/or other public interests (such as the protection of depositors) can be wound up – without the use of emergency law and without exposing taxpayers to excessive risk.
Which of these approaches do you consider particularly effective – and where are there still gaps?
The Federal Council is proposing a whole package of measures designed to strengthen crisis prevention and expand the range of instruments available in a crisis. In addition, there are regulations on how liquidity can be ensured in the event of a crisis. All three approaches are important and are ultimately interrelated.
Nevertheless, I would like to highlight two approaches in particular: in the past, liquidity planning for crises has been somewhat neglected compared to capital planning. That is now set to change. During the CS crisis, liquidity assistance amounting to CHF 168 billion was necessary to stabilise the bank and enable its merger with UBS. Such sums can only be provided through a government backstop – the so-called Public Liquidity Backstop (PLB). Before that, however, banks must be able to make maximum use of other sources of liquidity. The Federal Council therefore wants that banks be required to prepare sufficient collateral in the future in order to gain access to emergency liquidity from the Swiss National Bank in the event of a crisis. Quantitative requirements will also apply to the four systemically important banks. For me, the need for a PLB and improved liquidity planning is one of the key lessons learned from the CS crisis – and thus one of the most important measures that we urgently need to implement in Switzerland.
Secondly, it must be ensured that the authorities have various options available to them for dealing with a bank in crisis in an emergency. In the CS crisis, there was a well-developed plan, but only for one option. This envisaged that the bank would be financially restructured through the write-down of share capital and the conversion or reduction of debt instruments specifically designated for this purpose and then continued under new management. However, as is well known, the authorities considered the merger with UBS in March 2023 to be a better option. In order to avoid the need for emergency legislation in the future, the exit of a crisis-stricken bank from the market must be prepared in detail as an additional option through a sale or partial sale and an orderly winding down of business activities. To ensure that the various resolution options can be implemented in a legally secure manner, the legal basis in the Banking Act must be amended and supplemented.
In the NZZ, you emphasised that additional legal foundations are necessary, for example for the conversion of crisis bonds or the restriction of shareholder rights. Which reform steps should politicians prioritise in order to manage the next banking crisis without a state guarantee?
Every resolution involves interventions in the rights of shareholders and creditors. Such interventions can only be justified if they are carried out in the interests of overriding public interests and on a clear legal basis. However, these public interests are not yet defined in the Banking Act. In my opinion, this gap must be closed as a matter of priority. Other jurisdictions have explicit resolution objectives that the authorities must pursue. These include maintaining the critical functions of the crisis-stricken bank, avoiding significant negative effects on financial stability, protecting taxpayers' money and protecting depositors. Depending on how these resolution objectives can best be achieved, the authorities then decide on one or the other resolution option in the event of resolution. They only interfere with the rights of shareholders and creditors to the extent that this is necessary and proportionate to achieve the objectives. In substance, this is already the case today. However, anchoring this in the Banking Act would give the authorities a more legally secure basis for their decisions without unduly restricting their flexibility.
How do you assess the situation of medium-sized banks in Switzerland?
The Federal Council's proposals in the area of resolution are aimed at the four banks that are currently classified as systemically important. In addition to UBS, these include PostFinance, the Raiffeisen Group and Zürcher Kantonalbank. In my view, the big absentees in the debate on future bank resolution are the medium-sized banks – including several cantonal banks, but also Julius Bär and Valiant Bank, for example. These medium-sized banks are considered less important for the real economy and more easily replaceable than the four systemically important banks. Nevertheless, they pose a considerable threat to financial stability in the event of a crisis. Due to similar business models, contagion effects can quickly arise at these banks. It is highly likely that the authorities would not accept the threat to financial stability posed by the bankruptcy of a medium-sized bank.
However, under current law, medium-sized banks – unlike systemically important ones – are not required to make provisions for resolution and ensure their resolvability, for example by issuing convertible debt instruments (so-called bail-in bonds). Without rigorous planning, resolution is not feasible. In the event of a crisis at a medium-sized bank, the only option would be emergency intervention – a bailout – by the federal government. We must counteract this scenario through legislation. In future, medium-sized banks should also be required to draw up resolution plans and have them approved by FINMA.
Prof. Dr. Seraina Grünewald is professor of International Business Law and Financial Law at the Law School (LS-HSG) at the University of St.Gallen.
Cover image: Adobe Stock / Octavian
