Basel III capital regulations in Switzerland - assessment concluded by the Basel Committee
25 June 2013
The Basel Committee on Banking Supervision has today published a report assessing the regulations that implement the Basel capital framework in Switzerland.
The assessment team evaluated compliance of Switzerland's domestic capital rules vis-à-vis international Basel capital standards through its Regulatory Consistency Assessment Programme (RCAP). The team held technical discussions with senior officials and staff of the Swiss Financial Market Supervisory Authority (FINMA), and met with senior representatives from banks and regulatory audit firms based in Switzerland.
Switzerland has implemented its Basel capital framework with an intention that it conforms closely to the Basel standard. The assessment found the implementation of the International Approach closely aligned with Basel III standards and therefore assessed it as "compliant". 11 out of 14 assessed components were found to be "compliant", while three of the components were graded "largely compliant" (definition of capital, credit risk-IRB, and Pillar 3). Although some differences with the Basel framework were found in these three areas, none of the findings were evaluated to be material at this point.
An alternative capital adequacy regime in Switzerland, the "Swiss Standardised Approach", which has its origins prior to Basel I, is used primarily by smaller Swiss banks and is being phased out by end-2018. This approach was not assessed as compliant, but given it is not the approach used by most internationally active banks and is being discontinued, the assessment team judged that it should not impact on the overall rating for Switzerland.
In response to the assessment, FINMA initiated the rectification of the most important identified deviations from the Basel framework, without which the assessment would have been less favourable. This constitutes a strong commitment on the part of Switzerland to the global regulatory reforms, and is reflected in FINMA's response to the report.
The report published today reflects the Committee's on-going efforts at promoting adoption of its standards and to monitoring its members' full and consistent compliance with the Basel framework. Through the RCAP, the Committee monitors the timely adoption of regulations by its members, assesses their consistency with the Basel framework, and analyses the quality of intended regulatory outcomes. The RCAP also helps member jurisdictions to identify deviations from the Basel framework and assesses their materiality.
The Swiss report is the fifth RCAP assessment of Basel III capital standards. Earlier reports on the European Union, Japan, the United States and Singapore were published by the Committee in October 2012 and March 2013, respectively. An assessment of the implementation of the Basel III capital standards in China is currently under way, and assessments for Brazil and Australia are forthcoming.