The Swiss government on the 12th launched a public consultation on a package of regulatory tightening measures aimed at strengthening financial stability in the banking sector. The proposals are part of a broader review of “too big to fail” rules following the effective collapse of Credit Suisse in 2023, and center on mandatory deferral of bonuses for senior executives and expanded powers for the Swiss Financial Market Supervisory Authority (FINMA). The consultation period runs until November 19.
Under the government’s proposal, banks would be required to introduce compensation systems that evaluate long-term, sustainable performance and curb excessive risk-taking. Systemically important banks—particularly UBS (UBSG.SW), which became Switzerland’s only global bank after acquiring Credit Suisse—would face stricter requirements.
Finance Minister Karin Keller-Sutter said at a press conference that the measures are not intended to cap total compensation, but rather to steer bank management toward responsible, long-term success. “It is understandable that the public is frustrated when bonuses are paid despite poor performance, or when they are paid to people who have not fulfilled their responsibilities. Intervention should be possible in this area,” she said.
Details of the Bonus Rules
The bonus proposal would require a substantial portion of performance-linked compensation for senior executives and high earners to be deferred for several years. Internationally, a deferral period of roughly four to five years is typical. If misconduct or losses come to light during the deferral period, banks would be required to reduce or cancel unpaid bonuses. Where misconduct is proven, banks could also seek to claw back bonuses already paid.
In addition, banks with more than 250 employees would be required to clearly assign responsibility for key decisions to senior management. FINMA would gain early intervention powers in the event of emerging risks, as well as the authority to impose fines on financial institutions and apply penalties for delays in complying with supervisory orders.
The package also includes stricter requirements for recovery and resolution planning at systemically important banks, as well as streamlined procedures for pledging collateral to the Swiss National Bank (SNB) to facilitate access to central bank liquidity in times of crisis.
Key Regulatory Tightening Measures
Regulatory MeasureDetailsBonus deferralSubstantial portion of performance-linked pay for senior executives and high earners deferred for ~4–5 yearsReduction/cancellation of unpaid bonusesMandatory when misconduct or losses emerge during the deferral periodClawback of paid bonusesPossible where misconduct is provenClear allocation of responsibilityMandatory for banks with 250+ employees to assign accountability to senior managementExpanded FINMA powersEarly intervention authority, fines, penalties for delayed compliance
Note: Based on the regulatory package published by the Swiss government on the 12th
Industry and Parliamentary Reaction
UBS said in a statement that it would “review the proposals” and expressed support for strengthening Switzerland’s regulatory framework. At the same time, the bank stressed that Swiss banking regulation is already among the strictest in the world, arguing that “regulatory changes should be targeted, aligned with international standards, and balanced in a way that takes into account the differences in size and complexity of banks operating in Switzerland.”
The Swiss Bankers Association (SBA) pushed back, arguing the proposals go too far. The industry body said a crisis at a single bank should not trigger blanket regulatory tightening for all banks, and also voiced concerns about the significant expansion of powers granted to FINMA.
Parliament is currently deliberating a series of legislative amendments, including proposals that would require UBS to hold more capital. Finance Minister Keller-Sutter has maintained her stance on stricter capital requirements, despite calls from some lawmakers within the ruling center-right Free Democratic Party to ease the burden on UBS.
The government had signaled the direction of these reforms last year as part of the regulatory review following the Credit Suisse collapse. Credit Suisse was forced into a rescue takeover by UBS in March 2023 after years of mismanagement and risk-control failures. The episode dealt a major blow to Switzerland’s financial sector and triggered a fundamental rethink of the regulatory framework.
Based on the results of the consultation, the government is expected to draft formal legislation and submit it to parliament. Debate is likely to continue over the specific scope and level of regulatory tightening, pitting concerns about UBS’s competitiveness against calls to prioritize the stability of the financial system.