The Swiss Financial Market Supervisory Authority (FINMA) has urged UBS to bolster its risk management strategies in light of its recent acquisition of Credit Suisse. In a statement released on Tuesday, FINMA emphasized the necessity for UBS to refine its crisis management protocols to ensure that its operations can be halted without causing broader market instability.
FINMA has put a temporary hold on UBS’s resilience strategy, which is typically submitted for annual approval. The regulator pointed out that the bank’s emergency procedures require significant updates due to the implications of the Credit Suisse takeover.
“Drawing from the experience gained during the Credit Suisse crisis, there is a need for additional actions to enhance crisis preparedness and resolution planning for systemically important banks,” FINMA stated. It highlighted the necessity for UBS to develop its resolution planning further to expand the options available in the event of insolvency risks.
UBS must also ensure the capability to exit the market by either divesting or winding down specific business segments, or even selling the bank outright, without endangering the financial system’s stability or relying on taxpayer funds.
FINMA particularly stressed the importance of liquidity management, insisting that banks maintain adequate cash reserves to mitigate the risks associated with sudden withdrawal surges.
Additionally, UBS has been asked to streamline its organizational structures, processes, and IT systems to facilitate seamless integration with Credit Suisse.
The regulator’s requests align with recommendations outlined in the “Too Big to Fail” (TBTF) report released by the Swiss Federal Council earlier this year. This report addresses the need for robust regulations aimed at enhancing banking stability and minimizing the fallout from potential failures—a response initiated after the 2008 financial crisis.
UBS’s acquisition of Credit Suisse followed a crisis of confidence that led to significant client and investor withdrawals, unsettling the markets. As UBS now stands as Switzerland’s last major global bank, regulators are keen to implement lessons learned from past failures. In this context, FINMA has also called for increased oversight powers over financial institutions.
In response to FINMA’s announcement, UBS indicated that it has already begun to strategically enhance its emergency preparedness plans.
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