Crisis Management Improvements Required
The Swiss financial regulator, FINMA, has mandated UBS to bolster its crisis planning following the bank’s acquisition of Credit Suisse in 2023. In a statement released on Tuesday, FINMA highlighted the necessity for UBS to enhance its emergency strategies to ensure that the bank can cease operations without causing significant disruptions in the wider financial markets.
Suspension of Current Resilience Strategy
In conjunction with the new requirements, FINMA has put a hold on UBS’s current resilience strategy, which is typically submitted annually for approval. The regulator emphasized that given the recent developments stemming from the Credit Suisse crisis, UBS must revisit and update its emergency protocols. This proactive approach aims to strengthen the bank’s preparedness for potential crises and aid in effective resolution planning for institutions deemed systemically important.
Enhanced Options for Managing Insolvency Risk
FINMA stressed that UBS must further refine its resolution planning to offer a broader range of options in the event of insolvency risks. This development includes the necessity for UBS to facilitate market exits through potential sales or the winding down of certain business segments without jeopardizing the stability of the financial system. The aim is to protect taxpayers and prevent the need for public funds during such transitions.
Focus on Liquidity and Integration with Credit Suisse
In its directive, FINMA urged UBS to adopt stronger liquidity measures, ensuring the bank maintains ample cash reserves, particularly in scenarios where customers may rush to withdraw funds. Moreover, the regulator requested that UBS streamline its structures, processes, and IT systems to achieve complete integration with Credit Suisse after its acquisition.
Regulatory Context and UBS’s Response
FINMA’s requests align with recent proposals from the Swiss Federal Council’s report on “too big to fail” (TBTF) regulations, which were instituted to enhance bank stability post-2008 financial crisis. As UBS has emerged as Switzerland’s principal global banking entity, authorities are keen on learning from earlier oversights. In response to the regulator’s announcements, UBS confirmed that it has proactively begun revising its emergency plans in a focused manner to meet these regulatory expectations.
SOURCE: Ref Image from Reuters
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