Switzerland launches consultation on stricter bonus rules for banks

• Banks must defer significant portions of variable compensation for top executives for 4-5 years, with provisions to reduce, cancel, or claw back bonuses in cases of misconduct or losses
• Financial regulator FINMA will gain expanded powers to intervene earlier when risks emerge, impose fines on institutions, and levy penalties for delays in implementing orders
• New requirements apply stricter standards to systemically important banks like UBS (Switzerland's only remaining global bank after absorbing Credit Suisse) and mandate clear assignment of responsibility for key decisions at banks with 250+ employees

Switzerland Launches Banking Reform Consultation with Stricter Bonus Rules

Switzerland initiated a public consultation on Wednesday, August 12, targeting tougher banking regulations, particularly focused on executive compensation at UBS, following Credit Suisse's 2023 collapse. The consultation period extends until November 19, 2026.

Key Regulatory Proposals:

The draft regulations would require banks to structure bonus schemes emphasizing long-term, sustainable performance while discouraging excessive risk-taking. Systemically important institutions like UBS—Switzerland's sole remaining global bank after absorbing Credit Suisse—face particularly stringent requirements.

For top executives and high earners, a significant portion of variable compensation must be deferred for four to five years. Banks will be mandated to reduce or cancel outstanding bonuses if misconduct or losses emerge during the deferral period, with provisions allowing clawback of already-paid bonuses in cases of proven wrongdoing.

Additional Measures:

• Banks with at least 250 employees must clearly assign responsibility for key decisions to senior managers
• Financial regulator FINMA will gain enhanced powers for early intervention, institutional fines, and penalties for implementation delays
• Strengthened requirements for systemically important banks' stabilization and resolution planning
• Simplified collateral transfer processes to the Swiss National Bank to support crisis liquidity access

Market Context:

These reforms represent part of Switzerland's comprehensive overhaul of "too-big-to-fail" measures, responding to the significant damage Credit Suisse's demise inflicted on Swiss banking credibility. Lawmakers are concurrently debating proposals requiring UBS to maintain higher capital reserves.

The regulations aim to promote institutional stability and counteract risky behavior, reinforcing Switzerland's financial sector resilience in the post-Credit Suisse landscape.