Market Analysis

CEO Stefan Walter of FINMA, the Swiss financial regulator, stated in an interview with daily NZZ on Tuesday that the organization wants to be able to publicly identify and penalize banks that violate its regulations.

The request is part of FINMA's push for more authority following criticism of the organization for how it handled Credit Suisse's failure the previous year.

Walter said to the newspaper, "The publication of enforcement proceedings is the exception today." "In the future, non-communication should be the exception."

According to Walter, who started his position in April, naming and shaming financial firms would have a disciplinary effect if the businesses understood that the penalties would be made public.

"It also shows what the supervision achieves," he stated. Every supervisory authority faces the conundrum that if something goes wrong, everyone finds out. No one is aware if anything can be avoided."

He said that banks should provide complete information and be more transparent. More on-site inspections by the regulator might be conducted if cooperation was not available.

"In extreme cases, you must have the option of holding individuals responsible and, if necessary, removing them," he stated.

This advocated for a system of "senior managers," in which accountability is delegated to specific people, facilitating the identification of the guilty party.

Tougher capital requirements were among the 22 proposals the Swiss government published in April to strengthen the regulation of the nation's oversized financial sector.

Chairman Colm Kelleher of UBS, the largest bank in Switzerland, expressed reservations about the possible regulatory reforms, stating that a mandate to maintain greater capital was the "wrong remedy." UBS acquired Credit Suisse (CS) following its collapse.

Walter of FINMA stated that while he did not wish to begin a "feud" with UBS's management, more capital was required to lessen the likelihood and severity of a crisis in the future.

"Another critical factor in the stabilization or resolution phase is the allocation of capital inside the bank. This is demonstrated by the CS problem, Walter told the newspaper.

"As a size increases, so do the capital needs. This does not, however, address the issue of capital distribution; we need the parent business to have adequate buffer to prevent it from acting as a crisis bottleneck."

Paraphrasing text from "Reuters" all rights reserved by the original author.