The question of whether UBS is too big for Switzerland has been a heated topic for about a year and a half. Now, the Swiss Financial Market Supervisory Authority has concluded that more options are needed to wind down Switzerland’s only remaining major bank in the event of a crisis.

The Swiss Financial Market Supervisory Authority (Finma) has instructed UBS to revise its contingency plans. The bank must expand its options in case of insolvency, according to a statement from the regulator on Tuesday. The annual approval of the bank’s stabilization and emergency plans has been suspended.

The integration of Credit Suisse requires adjustments to ensure that UBS can still be restructured and liquidated if necessary. «In line with the Federal Council’s Too Big To Fail (TBTF) report, changes at the legislative level are necessary to give authorities additional options and more flexibility in a crisis,» Finma wrote.

Currently, UBS' emergency planning focuses only on the continuation of business through restructuring. Going forward, market exits via the sale or winding down of individual business units must also be feasible. Furthermore, the possibility of selling the bank as a whole should be prepared for in the coming years.

Loss Absorption Capacity Meets Requirements

Finma believes that UBS could be resolved today using the preferred «single point of entry» recapitalization strategy. UBS still meets the requirements for loss absorption capacity, the regulator emphasized.

However, the group’s structures, processes, and IT platforms need to be standardized due to the integration of Credit Suisse. This includes revising liquidity planning and the refinancing of UBS’s Swiss unit in case of a contingency.

Adjusting the Legal Framework

Finma is also advocating for the legal framework to be adapted to the new resolution options being developed, ensuring maximum legal certainty in the implementation of all scenarios. Additionally, it is crucial that the measures identified in the Federal Council’s TBTF report are implemented into law, including the Public Liquidity Backstop.

Emergency and stabilization planning is mandatory for UBS, given its status as a globally systemically important bank.