Swiss Government Cracks Down on Bank Executives Over Risky Behavior

The Swiss government is looking to tighten its control over bank executives and prevent risky behavior. The Federal Council wants to hold bank executives more accountable for their actions and ensure that banks are better prepared to handle crises.

The proposed regulations aim to close loopholes in the 'too big to fail' rules, which were highlighted by the Credit Suisse debacle. The measures also intend to reduce the risk of taxpayers and the economy having to bear financial risks.

Under the new system, banks with over 250 employees will be required to clearly define who is responsible for decision-making and ensure that corporate culture prioritizes risk management. Bonus incentives for risky behavior will also be eliminated, and a multi-year vesting period will be introduced for senior executives' variable remuneration.

The Swiss Financial Market Supervisory Authority (FINMA) will be granted additional powers to impose fines of up to 10% of a bank's operating profit in case of non-compliance. The Federal Council also plans to increase the scope and precision of stabilisation and resolution plans for systemically important banks, as well as grant them extended access to liquidity from the Swiss National Bank.