Financial System of Australia

Topics: Bank, Banking in Switzerland, Switzerland Pages: 5 (1732 words) Published: August 27, 2013
Country : Switzerland
Swiss Financial System
In this part of the research, we will be looking into different aspects and institutions that make up the Swiss financial system. The Swiss financial system is large and well developed and plays an important part in Switzerland’s domestic economy and also internationally (IMF, 2007). Firstly, we will look into the different players in the financial system and also its regulatory body. Swiss National Bank (SNB)

SNB was established in the year 1907 as an independent central bank for the Swiss confederation. Its stock is held mostly by public shareholders whom consist of cantons and cantonal banks which would be discussed later. The primary objective of SNB is to practice a monetary and currency policy which caters to the best interest of the country as a whole (SBA,2010). The SNB can also act as a lender of last resort to provide liquidity to other Swiss banks if certain prerequisites are met (SBA,2010). However, they do not have regulatory powers over the financial institutions in Switzerland as this is under the purview of the Swiss Financial Market Supervisory Authority also known as FINMA. This is somewhat similar to Australia’s regulatory body “APRA”. SNB does not focus on individual banks but focuses on the banking sector as a whole (Hildebrand, 2009). Swiss Bankers Association (SBA)

Founded in 1912, the SBA is a trade association and is a self regulation organ and representative of the interests of banks in Switzerland. It is one of the most important institutions in the Swiss Financial Centre (SBA, 2010). The Big 2

The 2 large banks that dominate the Swiss financial system are Union Bank of Switzerland (UBS) and Credit Suisse. These 2 banks are internationally focused and account for two-thirds of the Swiss’s global assets (IMF, 2007). They have branches and subsidiaries in over 50 countries and also maintain a tight network of domestic branches (SBA, 2010). UBS and Credit Suisse offer most services that other international banks offer including investment banking (SBA, 2010). Cantonal Banks

Cantonal banks are defined as “banks with a statutory basis under cantonal law, with the bank’s capital and voting rights being held one-third by cantons”(SBA, 2010). Smaller cantonal sized banks mainly concentrate on savings and mortgage services whereas the larger ones offers full fledged services being no different than an full-serviced bank (SBA, 2010). Regulatory authority

As stated earlier, FINMA is the regulatory authority for banks, stock exchanges and insurance. It was established in 2009 as the successor of the Swiss Federal Banking Commission, the federal office of private insurance, and the Anti-Money Laundering Control authority (SBA, 2010). It brings all these previous bodies under one umbrella body which is FINMA. Its activities include granting new banks permits to start business and continuously supervising them through auditors (SBA, 2010). FINMA is also charged with restructuring and liquidation proceedings, combating money laundering, supervising public bids for public listed companies (SBA, 2010). FINMA is backed by the law to impose sanctions or order corrective measures. They can even withdraw a bank’s operating permit if the case is seemed serious enough (SBA, 2010). Regulation and supervision are jointly done by SNB and FINMA. While SNB deals with the macro side of things, FINMA will deal with micro. Among aspects that are supervised are capital requirements (Basel II) and liquidity requirements, depositor protection, financial reporting standards and remuneration schemes (SBA, 2010). Switzerland has adopted all 3 pillars of Basel II and went one step further by introducing even tighter equity requirements on the two big banks as they are too big to fail (SBA, 2010). Features of it are that both banks have to hold 50% to 100% in excess of international requirement, and a leverage ratio was also implemented. Depositor Protection

Switzerland implemented...
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