Tag Archives: CapLaw-2012-3

FINMA Opens Consultation on Banking Insolvency

On 16 January 2012 the Swiss Financial Market Supervisory Authority FINMA has opened the consultation on the global revision of the Banking Insolvency Ordinance FINMA (BIO-FINMA). The revision becomes necessary due to the following amendments to the Banking Act:

  • On 1 September 2011, important new provisions on bankruptcy and restructuring laws provided in the Banking Act entered into force (referred to as deposit protection scheme bill).
  • As per 1 March 2012 various parts of the Banking Act have again be amended as part of the “too-big-to-fail” bill.

The proposed draft of the BIO-FINMA shall implement more detailed provisions in particular with respect to restructuring proceedings and the restructuring plan in line with the amendments stemming from both bills mentioned above. As the new BIO-FINMA applies to all banks and securities dealers, the FINMA Bank Bankruptcy Ordinance of 30 June 2005 is to be renamed Ordinance on the Insolvency of Banks and Securities Dealers.

A novelty proposed under the BIO-FINMA is that in an insolvency case it will no longer only be possible to restructure the entire bank, but FINMA can also ensure that important individual banking services are transferred to other legal entities with the goal to protect the financial system and the Swiss economy. In order to raise the capital required for a restructuring, the bank shall be given new contractual instruments: in particular, it will be able to trigger debt-to-equity swaps and statutory bail-ins. The BIOFINMA shall further provide that in certain cases, FINMA may also temporarily suspend existing contractual termination rights of the bank’s counterparties. Other changes aim to result in quick and efficient proceedings, tailored to the relevant case.

The proposed amendments derive to a large extent from the international rules issued by the Financial Stability Board.

The consultation period has ended on 2 March 2012.

FINMA Decision in the Matter of KPT

In January 2012 FINMA announced that it sanctioned a Swiss insurance company and its directors for their improper behaviour relating to an employee participation program in connection with a contemplated merger with another Swiss health insurance carrier. This article discusses the cause for this decision and its legal foundations.