Switzerland moves to tighten bank bonus rules as post-Credit Suisse reform gathers pace
The Swiss government has launched a public consultation on a new regulatory package that would force banks to link variable remuneration more closely to sustainable long-term performance. The reform would give FINMA stronger enforcement powers and impose tougher requirements on systemically important institutions such as UBS, as Bern continues to overhaul financial supervision following the collapse of Credit Suisse.
Switzerland is preparing to tighten the rules governing bonuses at its banks as part of a broader attempt to strengthen financial stability and prevent a repeat of the failures exposed by the collapse of Credit Suisse in 2023.
The federal government launched a public consultation on Wednesday on a package that would reshape variable remuneration, increase individual accountability among senior bankers and considerably strengthen the intervention powers of the Swiss Financial Market Supervisory Authority, FINMA.
The proposals would apply particularly stringent requirements to systemically important banks, placing UBS at the centre of the reform. Following its emergency takeover of Credit Suisse, UBS is Switzerland's only remaining globally systemic banking group.
The consultation will remain open until 19 November 2026, after which the government will assess feedback before moving ahead with the legislative process.
Bonuses would depend more heavily on long-term results
The proposed regime is not designed to establish a formal ceiling on bankers' salaries or bonuses.
Instead, Switzerland wants financial institutions to structure variable remuneration so that employees and executives are rewarded for sustainable long-term performance rather than short-term results that may involve excessive risk.
A significant proportion of bonuses awarded to top executives and other highly paid employees would have to be deferred for several years. Internationally, such deferral periods commonly extend for four to five years, according to the Swiss government.
This would give banks and regulators more time to determine whether apparently profitable decisions ultimately generate losses or reveal previously unidentified risks.
If losses or misconduct emerge during the deferral period, institutions would be required to reduce or cancel bonuses that have not yet been paid.
The proposal goes even further in cases of proven wrongdoing: compensation already received could potentially be clawed back.
Switzerland wants to prevent rewards for failure
The political rationale behind the reform reflects one of the most controversial lessons of the Credit Suisse crisis: executives can receive substantial remuneration during periods in which risks are accumulating inside an institution.
Swiss Finance Minister Karin Keller-Sutter argued that public frustration is understandable when remuneration continues to be paid despite poor corporate performance or when individuals have failed to fulfil their responsibilities.
The proposed system is intended to create a stronger connection between decision-making, accountability and eventual financial consequences.
Rather than evaluating management performance exclusively at the moment a bonus is awarded, the new framework would allow subsequent events to influence how much executives ultimately receive.
That approach could significantly change incentives at the upper levels of Swiss banking.
Credit Suisse remains at the heart of the regulatory overhaul
The reform cannot be separated from the events surrounding Credit Suisse.
The historic lender suffered years of scandals, management problems and financial losses before a severe crisis of confidence culminated in its emergency acquisition by UBS in March 2023.
The episode damaged Switzerland's reputation as one of the world's most stable financial centres and raised questions about whether existing "too big to fail" regulation was sufficient for institutions whose balance sheets can be enormous relative to the Swiss economy.
The government subsequently launched a far-reaching review of banking regulation.
Bonus reform is one part of that process. Another politically sensitive component concerns capital requirements for UBS, with the government seeking stronger financial buffers to reduce the potential risks associated with another systemic banking crisis.
UBS faces a more demanding regulatory environment
UBS now occupies an exceptional position within the Swiss financial system.
The disappearance of Credit Suisse as an independent institution means Switzerland has effectively concentrated its global banking champion into a single group, increasing the importance of ensuring that UBS can withstand severe financial shocks without requiring government intervention.
Swiss lawmakers are already debating proposals that would force the bank to hold additional capital.
Keller-Sutter has maintained a firm position in favour of tougher capital requirements, despite calls from some members of her own centre-right FDP party to reduce the potential burden on UBS.
The debate highlights the difficult balance facing Switzerland.
Regulators want to make another systemic crisis less likely, while the banking industry warns that excessive requirements could undermine the international competitiveness of Swiss financial institutions.
Senior managers would face clearer individual responsibility
The reform extends beyond bonuses.
Banks employing at least 250 people would have to establish clearer responsibility for important decisions among senior managers.
The measure is intended to make it easier to determine who was responsible when serious management failures occur.
This addresses a recurring regulatory problem in large financial institutions, where complex organisational structures can make it difficult to assign individual accountability for decisions taken across committees, business divisions and multiple layers of management.
Clearer responsibility could also give supervisors a stronger basis for intervening when senior executives fail to properly manage risks.
FINMA would gain significantly stronger powers
One of the most consequential elements of the package concerns FINMA.
The Swiss financial regulator would receive greater authority to intervene earlier when it identifies emerging risks.
It would also be able to fine financial institutions and impose penalties when banks fail to implement supervisory orders within required deadlines.
The proposal responds to criticism that Switzerland's regulator historically lacked some of the enforcement tools available to financial supervisors in other major jurisdictions.
Giving FINMA greater sanctioning powers could therefore alter the relationship between banks and their regulator by increasing the financial consequences of non-compliance.
Swiss banking industry warns the reforms go too far
The proposals are already encountering resistance.
The Swiss Bankers Association has criticised the package, arguing that the government is proposing an excessive expansion of FINMA's powers.
The industry organisation also disputes the idea that the failure of Credit Suisse should justify broad regulatory tightening affecting other banks that were not responsible for the crisis.
This argument is likely to become central to the consultation.
Banks will seek to distinguish between measures specifically designed to address systemic institutions such as UBS and rules that impose additional compliance costs across a much wider section of Switzerland's financial industry.
For policymakers, however, the Credit Suisse collapse demonstrated how weaknesses in governance, incentives and supervision can eventually create risks extending far beyond a single institution.
Crisis planning would also be strengthened
Switzerland is simultaneously seeking to improve what happens if preventive regulation fails.
The proposals would strengthen stabilisation and resolution planning for systemically important banks, requiring institutions to be better prepared for severe financial stress.
The package also envisages simplifying the transfer of collateral to the Swiss National Bank.
That change is intended to make it easier for banks to access central-bank liquidity during a crisis, potentially giving authorities more options for stabilising an institution before problems escalate into a disorderly collapse.
A new model for Swiss banking supervision
The proposed bonus restrictions are therefore only one component of a substantially broader transformation.
Switzerland is attempting to build a regulatory framework in which executive incentives, personal accountability, capital strength, regulatory enforcement and crisis preparedness operate together.
The objective is not to prevent banks from rewarding strong performance, but to ensure that remuneration does not encourage decisions whose profitability appears attractive in the short term while leaving risks for shareholders, customers or taxpayers later.
For UBS, the implications could be particularly significant.
As Switzerland's sole remaining global banking champion, it now combines enormous economic importance with unprecedented regulatory scrutiny.
The consultation running through November will determine how far Bern is prepared to go. But the direction is increasingly clear: after Credit Suisse, Switzerland wants banking executives to remain financially accountable for their decisions long after a bonus has initially been awarded.
