Swiss 'Too Big To Fail' Provisions In Force March 1

by Ulrika Lomas, Tax-News.com, Brussels

17 February 2012

Switzerland’s Federal Council has recently decided to bring the amendment to the Banking Act designed to resolve the ‘too big to fail’ issue into force on March 1, 2012.

According to the Swiss Federal Department of Finance (FDF), as a result of the amendment, which was passed by parliament on September 30, 2011, systemically important banks will have to meet more stringent capital, liquidity and organisational requirements in the future.

At the same time, the Federal Council also adopted ordinance amendments that implement the tax measures set out in the amended legislation.

In its release, the FDF explains that: “In accordance with the "too big to fail" bill, systemically important banks have to build up more capital, meet more stringent liquidity requirements and ensure better risk diversification by 2018. Moreover, they must organise themselves in such a way that they do not jeopardise the functioning of the national economy in the event of looming insolvency.”

It adds: “The amended legislation also contains changes to the Federal Act on Stamp Duties. Their purpose is to develop a Swiss capital market that works well and to promote contingent convertible bonds (CoCos) in Switzerland. These bonds play a key role in the emergency plans of systemically important banks. It was resolved to abolish the issue tax on debt capital and to exempt the conversion of CoCos into equity from the issue tax.”

As a result of these legislative amendments, the Federal Council has modified the Ordinance on Stamp Duties and the Ordinance on Withholding Tax.

The Federal Council aims to submit the further amendments to the Banking Ordinance and Capital Adequacy Ordinance, needed to enforce the "too big to fail" legislation, to parliament for approval.

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