SECTION 1: Basel III implementation 1.1 How advanced is Basel III implementation in your jurisdiction? Basel III implementation is essentially complete. Deadlines for its introduction have or are near to being met. In June 2013, the Basel Committee on Banking Supervision issued its report on the assessment of Basel III regulations for Switzerland. As indicated in the report “(t)he adoption of Basel IIIbased capital rules in Switzerland was completed during 2012”. Indeed, the amendments to the ordinances issued by the Swiss Federal Council and the related circulars of the Swiss Financial Market Supervisory Authority (FINMA) have been adopted in 2012, entered into effect as from January 1 2013 and, taking into account their transitional periods of application, should be fully applicable at the end of 2018. On October 28 2013, the FINMA released the amended versions of Circular 08/19 ‘Credit risks – banks’, Circular 08/20 ‘Market risks – banks’, Circular 08/22 ‘Capital adequacy disclosures – banks’, and Circular 13/1 ‘Eligible equity capital – banks’ which have been slightly revised to correspond to the implementation of the Basel III regime. The respective changes shall enter into force on 1 January 2014. 1.2 To what extent is local implementation expected to be more stringent than Basel III requires? Basel III will be implemented in accordance with Basel III requirements with a moderate Swiss finish. The Swiss capital adequacy regime sets different minimum capital thresholds based on different categories of banks, classified by their size and importance. In Switzerland, the lowest thresholds set by the Basel III regulations apply only to the smallest banks. 1.3 Is it expected that the leverage ratio could be implemented in your legislation sooner than the official Basel III timetable requires? It is anticipated that the timeframe for implementation of the leverage ratio will follow the timeframe required by Basel III. 1.4 Have specific additional rules and regulations been issued in relation to Systemically Important Banks? Yes, final rules and regulations have been published and are in force. Following the report of a commission of experts appointed by the Swiss Federal Council to (i) define the notion too big to fail, (ii) review the consequences of the bankruptcy and liquidation of large Swiss companies (including banks) and (iii) formulate propositions to limit such risks for the Swiss economy, specific rules have been adopted and implemented in Switzerland. These will limit the risks created by large banks (UBS and Credit Suisse Group), among others, through the Swiss Federal Act on Banks and Savings Banks (BA, modifications of September 30 2011), the Ordinance on Capital Adequacy (CAO, modifications of June 1 2012) and the Ordinance on Banks and Savings Banks (BO, modifications of January 1 2013).
SECTION 2: Capital structure Common Equity Tier 1 (CET1) structural idiosyncrasies 2.1 Is it anticipated that instruments other than common shares may be eligible to qualify as CET1 for banks and mutuals? Yes, instruments other than common shares may qualify as CET1 for both banks and mutual. The CAO provides that, subject to certain conditions, preferred shares and participation capital qualify as CET1. Additional Tier 1 (AT1) structural idiosyncrasies 2.2 What type of loss absorbency features will be required for AT1 securities in your jurisdiction? Regulators will allow temporary and permanent write down as well as equity conversion structures. 2.3 What capital triggers are expected for AT1 securities? Different triggers in excess of the 5.125% trigger are expected. Tier 2 structural idiosyncrasies 2.4 What type of loss absorbency features will be required for Tier 2 securities in your jurisdiction? Write down structures are expected. 2.5 Will interest deferral be required for Tier 2 securities in your jurisdiction? It is unclear whether interest will be required to be deferred.
SECTION 3: Contingent capital 3.1 Has a role for contingent capital with triggers higher than 5.125% been formally established in your jurisdiction? Yes, it is clear that contingent capital will count towards a bank’s capital ratios.
SECTION 4: Bail in/non-viability 4.1 Is there in existence a relevant resolution regime which meets the requirement of the January 2011 Basel press statement? Yes, there is a relevant resolution regime in place.
SECTION 5: Tax treatment and other matters 5.1 To what extent have local rules or regulations been changed to enhance the tax efficiency of these instruments? There is no need to change rules or regulations, as the tax treatment of Basel III instruments will be broadly the same as pre-Basel III. 5.2 Will local listing authorities treat the listing of the new Basel III instruments on the same basis as pre-Basel III instruments? There will be no change in the treatment for listing of Basel III instruments. It is worth noting that the SIX Swiss Exchange granted a waiver to its disclosure obligations when Credit Suisse Group issued its first contingent convertible bonds (CoCos).