Swiss regulator orders UBS to strengthen emergency protocol

UBS must improve its crisis planning to ensure that its operations could be stopped without triggering wider market instability, announced FINMA on Tuesday.

The Swiss regulator said in a statement that it had suspended UBS’s resilience strategy – a plan that is sent for approval each year.

UBS’s emergency protocol, it explained, must be updated in light of its takeover of rival Credit Suisse in 2023.

“Based on the experience of the Credit Suisse crisis, additional options for action are required to further strengthen crisis preparations and resolution planning for systemically important banks,” FINMA said.

“UBS’s resolution planning must be further developed in order to increase the options for action available if there is a risk of insolvency,” it added.

“It must be possible to exit the market by selling or winding down individual business segments as well as selling the bank without jeopardising the stability of the financial system and without using taxpayers’ money.”

In particular, FINMA said that there needs to be a greater focus on liquidity-generating measures, notably so that banks have sufficient cash reserves if there is a rush to withdraw money.

UBS was also asked to harmonise its structures, processes, and IT platforms to ensure that it is fully integrated with Credit Suisse.

FINMA said that its requests are consistent with the proposals in the TBTF (too big to fail) report of the Swiss Federal Council, published earlier this year.

After the 2008 financial crisis, TBTF regulations were brought in to improve the stability of banks and limit the damage caused by failures. These rules are continually being reviewed.

UBS stepped in to buy rival Credit Suisse after it lost the confidence of clients and investors, which spooked markets and triggered mass withdrawals.

Now, as UBS has emerged as the country’s last significant global bank, regulators are keen to learn from the mistakes of the past.

FINMA has notably called for greater powers to oversee lenders.

In response to Tuesday’s announcement, UBS said it had already started to develop its emergency plans “in a targeted manner”.