Too big to fail regulation tougher bonus rules Federal Council wants to rein in top banks

The Swiss federal council has proposed stricter regulations aimed at curbing excessive bonuses and holding bank executives more accountable, following the collapse of Credit Suisse. The measures include introducing a multi-year lock-in period for variable compensation payments to top earners and high-paid employees across all banks, with provisions allowing for the clawback of bonuses under certain conditions. These proposals were announced during a media conference by Finance Minister Karin Keller-Sutter and are intended to close gaps in the “too big to fail” (TBTF) regulatory framework. The initiative follows the financial crisis triggered by Credit Suisse’s failure, which exposed vulnerabilities in the banking sector and raised concerns over public finances, economic stability, and state support. The federal council plans to introduce a responsibility regime within the Banking Act for institutions employing more than 250 staff. This would require clear designation of individuals responsible for specific decisions, aiming to improve corporate culture and risk management practices. Additionally, the Federal Council wants to enhance the stabilization and resolution plans for systemically important banks, ensuring they have better access to liquid funds from the central bank. The proposed rules also aim to prevent taxpayers, the economy, and the state from bearing financial risks again, similar to those faced after the Credit Suisse debacle. The Swiss Financial Market Supervisory Authority (Finma) and the Swiss National Bank (SNB) have welcomed the new proposals. In a statement, the SNB emphasized that the measures are crucial for addressing regulatory weaknesses revealed by the Credit Suisse crisis and for strengthening the stability of Switzerland’s financial system. It specifically highlighted the updated liquidity regulation as a key component. Finma echoed these sentiments, calling the measures essential for reinforcing bank stability and the reputation of the Swiss financial center. It also stressed the importance of implementing the proposals as a comprehensive package to achieve optimal results. Under the revised liquidity ordinance, the federal council intends to set quantitative minimum requirements for system-relevant and mid-sized banks regarding secured liquidity drawdowns from the central bank. Smaller banks are excluded from this requirement. The proposal also grants Finma additional powers, including the ability to impose fines up to ten percent of a bank's annual operating result. Early interventions are planned to protect customers' interests, while the authority will gain greater transparency into completed enforcement procedures. The proposals include a ban on incentive-based bonuses that encourage excessively risky behavior. Variable pay for senior executives and highly compensated staff will face a mandatory waiting period before being paid out. This measure aims to align executive incentives with long-term stability rather than short-term gains. The federal council had previously outlined these ideas in June 2025, indicating a continued focus on reforming the banking sector to prevent future crises. The government is seeking public input through a consultation process, inviting feedback from stakeholders, including financial institutions, industry representatives, and the general public. The consultation period allows for further refinement of the proposals before finalizing them. The federal council expects the measures to contribute to a more resilient banking system, reduce systemic risks, and restore confidence in the financial sector. The reforms reflect a broader effort to ensure that the banking sector operates responsibly and transparently, safeguarding both public interest and economic stability.