New Powers for the Swiss Financial Market Supervisory Authority FINMA under Switzerland's proposed 'Too Big to Fail' Reform
On 12 August 2026, the Swiss Federal Council opened consultation on amendments to the Banking Act (BankA) and the Liquidity Ordinance, which will run until 19 November 2026. The proposed package includes measures to strengthen FINMA’s supervisory powers, building on the finding that FINMA’s instruments had reached their limits during the Credit Suisse crisis. Existing instruments are to be enhanced and new ones introduced to help FINMA to enforce supervisory law more effectively.
The proposed instruments can be divided into two groups according to their scope of application. Direct audits and the early intervention model would be regulated under the BankA and, in principle, apply to all banks. The remaining instruments would be incorporated into the Financial Market Supervision Act (FINMASA) and would generally apply across the whole regulated financial sector, including insurers, portfolio managers, fund management companies, securities firms and financial market infrastructures. A restriction to systemically important banks was considered for several instruments but rejected. The following overview is based on the consultation draft legislation and the Federal Council's explanatory report.
New supervisory instruments for banks
Direct audits and on-site supervisory reviews
The proposal would make it easier for FINMA to assess the situation at banks first-hand. Under current law, it may conduct direct audits of banks, banking groups and financial conglomerates only where necessary in view of their economic significance, the complexity of the matters to be examined or the approval of internal models (Art. 23 BankA). By contrast, FINMA already has the power to conduct direct audits of other supervised entities, such as securities firms, fund management companies and managers of collective assets, without having to meet comparable statutory conditions. The proposal would remove these additional conditions for banks, aligning FINMA’s direct audit powers across the regulated financial sector.
Under Art. 23 of the draft BankA, FINMA would be able to conduct direct audits of banks, banking groups and financial conglomerates without being bound by the existing specific conditions. The principle of proportionality would continue to apply. The dual supervisory system would also remain in place: banks would still be required to appoint an audit firm. FINMA would use a risk-based approach to determine which audits to conduct through on-site supervisory reviews and would coordinate these with the audit firms and internal audit. The audit strategies would make clear who is responsible for each audit. According to the explanatory report, the audit burden on banks should remain predictable and, on average, unchanged.
Accompanying measures would strengthen audit firms’ independence, including a maximum audit engagement term of generally 14 years and a requirement for FINMA approval of the appointment and replacement of the audit firm.
Three-stage early intervention model
For the Federal Council, a key lesson from the Credit Suisse crisis is that FINMA must be able to intervene preventively at an early stage and effectively enforce its measures. The aim is to prevent banks from entering a crisis in the first place or otherwise putting clients’ interests at risk. The proposed early intervention model clarifies and structures existing measures and adds further powers. This is intended to increase legal certainty and facilitate timely intervention. It is also intended to prevent the suspensive effect of appeals from significantly delaying implementation or thwarting the purpose of a measure.
The proposed model distinguishes three stages of intervention with increasingly intrusive measures. These stages need not be followed sequentially: the relevant risk situation and the statutory conditions for intervention at each stage would determine which measures are available.
First stage – measures to ensure an appropriate organisational structure (Art. 19 of the draft BankA): If FINMA in the course of its ongoing supervision finds that a bank is breaching supervisory law or could do so in the foreseeable future, it would be able to order measures to ensure an appropriate organisational structure. Unlike measures to restore compliance with the law under Art. 31 FINMASA, these measures would not necessarily require proof that a breach of supervisory law has already occurred. FINMA could rely on qualitative or quantitative criteria, such as identified weaknesses in the internal control system or rapid expansion in a region or among a client base associated with heightened risks. The non-exhaustive list of measures includes organisational changes, placing the bank within the scope of the senior managers regime, requiring certain key functions to be headed by different individuals, designating additional functions subject to the senior managers regime, changes to the remuneration system and restrictions on business activities.
Second stage – early intervention measures (Frühinterventionsmassnahmen; Art. 24 of the draft BankA): If FINMA finds that a bank’s financial position in terms of capital or liquidity has deteriorated significantly or could do so in the foreseeable future or that clients’ interests are otherwise at risk, it would be required to order early intervention measures. This would also apply where regulatory capital and liquidity requirements are still being met. FINMA would retain discretion in selecting the necessary measures. When assessing the risk situation, it could consider not only supervisory findings but also market indicators and assessments by analysts and rating agencies. As an example of another type of risk to clients’ interests, the explanatory report refers to a bank that systematically seeks to evade supervision by failing to comply with its information and reporting duties.
In addition to all first-stage measures, FINMA would be able to order a restriction of the bank’s scope of business, such as reducing or selling its investment banking business; prohibit distributions such as dividends, share buybacks or interest payments on Additional Tier 1 (AT1) instruments; require the bank to strengthen its capital or liquidity position; require implementation of measures from the recovery plan; order an extraordinary general meeting to be convened; require the replacement of the regulatory audit firm or statutory auditor; and withdraw the governing bodies’ powers of representation, remove them from office or appoint new governing bodies itself. For listed banks, FINMA could also order the postponement of any ad hoc announcement if publication could frustrate the purpose of the measure.
Third stage – protective measures (Schutzmassnahmen; Arts. 25 and 26 of the draft BankA): Where a bank is at risk of insolvency, FINMA would continue to have access to more far-reaching measures, such as prohibiting the bank from making or accepting payments or conducting securities transactions, closing the bank or ordering a moratorium or a deferral of maturities. Certain measures currently available only at this stage, such as replacing the audit firm or removing governing bodies from office, have been allocated to the second stage under the draft (Art. 24 of the draft BankA) and would become available to FINMA even in the absence of a risk of insolvency. Conversely, where there is a risk of insolvency, FINMA could also order any measure available at the first two stages. The list of protective measures would remain non-exhaustive.
Of practical importance, appeals against measures in all three stages would have no suspensive effect (Art. 52f of the draft BankA). The measures would therefore, in principle, be enforceable upon notification. Although the appellate authority could grant suspensive effect on request, the explanatory report states that it should exercise restraint in doing so. Suspensive effect could not be granted for appeals against protective measures under Art. 26 of the draft BankA. According to the explanatory report, FINMA should communicate the main principles of its early intervention practice so that banks can align their conduct accordingly.
New supervisory instruments for all financial institutions
Administrative financial penalties (Pekuniäre Verwaltungssanktion)
FINMA would gain the power to impose financial penalties on supervised legal entities and partnerships for serious breaches of supervisory law. The aim is to create a direct financial deterrent, reinforced by informing the public about the penalty. Foreign financial market supervisory authorities already have comparable powers to impose fines.
Under Art. 37a of the draft FINMASA, a supervised legal entity or partnership that seriously breaches FINMASA or a financial market act could face a penalty of up to 10% of its average annual operating income over the preceding three financial years. According to the Federal Council, the provision also covers ordinances, FINMA circulars and self-regulatory standards approved by FINMA. Natural persons, including members of governing bodies and employees, would not fall within the scope of this new power to impose fines.
The amount of the penalty would depend on the institution’s size and the seriousness of the breach and must not be so high as to put the institution at immediate risk of insolvency. A reduction would be available where the institution cooperates beyond its statutory obligations (e.g. through early self-reporting or the immediate voluntary implementation of corrective measures). Penalty proceedings would have to be opened within seven years of the breach, and the amounts collected would accrue to the Confederation. The Federal Council would set out the principles governing the calculation and reduction of penalties in an ordinance.
Since proceedings to impose such fines may fall within the criminal limb of Art. 6 of the European Convention on Human Rights, Art. 37b of the draft FINMASA expressly regulates the duty to cooperate in penalty proceedings. The institution would still be required to provide factual information and produce documents in such proceedings, but could refuse to admit a breach of supervisory law. Furthermore, an admission made in penalty proceedings, during ongoing supervision or in other proceedings could not be used to impose a fine without the institution’s consent. This protection, however, would cover only an express and detailed admission of the legal breach, not the disclosure of factual elements or the implementation of remedial measures. The proposal therefore does not provide for a right to remain silent.
Periodic penalty payments (Zwangsgeld)
Periodic penalty payments would enable FINMA to secure the swift and effective implementation of its decisions. Unlike a fine, they would not serve a punitive purpose but would create a financial incentive to comply with an enforceable order.
Under Art. 32a of the draft FINMASA, FINMA could impose a periodic penalty payment if, despite a prior warning, a supervised entity fails to comply with an enforceable FINMA decision within the specified period. The periodic penalty payment would not be imposed in the decision to be enforced, but in a separate decision after the deadline has expired without compliance. That separate decision could be challenged independently before a court (e.g. on proportionality grounds), but this would not allow the underlying decision to be challenged again. The payment would accrue for each day from the expiry of the deadline until compliance, for a maximum of six months. The daily amount could not exceed 5% of the average daily operating income over the preceding three financial years. Payment would not release the entity from its obligation to comply with the decision, and periodic penalty payments could be combined with other supervisory measures. The amounts collected would accrue to the Confederation.
Settlement (Gütliche Einigung)
Settlements are intended to expedite enforcement proceedings, reduce costs and encourage cooperation. The express statutory basis is intended to ensure transparency, predictability and equal treatment in concluding such agreements. Comparable instruments are used notably in the UK and US.
Under Art. 37c of the draft FINMASA, once the facts have been established in enforcement proceedings opened under Art. 30 FINMASA, FINMA could propose to the supervised entity that the proceedings be concluded by settlement. Entering a settlement would be at FINMA’s discretion; supervised entities would have no entitlement to a settlement. If no agreement is reached, the proceedings would be concluded through the ordinary process by an appealable decision. The settlement would cover the measures required to restore compliance with the law, the allocation of costs and a waiver of appeal rights by the parties. Where a fine is imposed, a settlement would lead to a reduction in the penalty. The settlement would be limited to the financial institution and could not include measures against natural persons. Furthermore, the measures would have to remain within FINMA’s supervisory powers. FINMA would incorporate the settlement into its decision, which would be enforced under the general rules. As a rule, the public would also be informed about proceedings concluded by settlement (see below).
Information of the public
Informing the public about individual decisions and investigations is intended to make FINMA's supervisory practice more transparent and strengthen confidence in the supervisory authority and the functioning of the markets. Under current law, FINMA may inform the public about individual proceedings only where there is a particular supervisory need (Art. 22 para. 2 FINMASA). This principle would be reversed for final enforcement decisions: FINMA would, as a rule, systematically inform the public and name the institutions concerned. This is also intended to counter rumours and have a preventive effect.
Under Art. 22 para. 1bis of the draft FINMASA, FINMA would generally be obliged to inform the public about final decisions in enforcement proceedings opened under Art. 30 FINMASA. FINMA would not publish the entire decision but provide a neutral and objective account of the conclusion of the proceedings, in practice through a press release. Decisions discontinuing proceedings and other decisions (e.g. in ongoing supervision) would not be covered by this duty. Information could be provided after the enforcement proceedings have concluded, even while the decision remains subject to appeal. Legal entities and partnerships would generally be named. For natural persons, FINMA would provide information without naming them unless there were a particular supervisory need to do so (Art. 22 para. 3bis of the draft FINMASA).
Under the proposal, FINMA could exceptionally refrain from informing the public if overriding public or private interests precluded disclosure, particularly where it would seriously impair financial market stability or jeopardise ongoing investigations. According to the explanatory report, however, the conditions for such exceptions should be interpreted strictly. This routine disclosure must be distinguished from information about ongoing investigations and other proceedings and measures under Art. 22 para. 2 of the draft FINMASA, such as organisational, early intervention or protective measures. For these individual cases, the current principle would remain: FINMA could provide information only where there is a particular supervisory need (e.g. to protect market participants or correct false information or enforce a measure).
Industry ban (Berufsverbot) and disgorgement (Einziehung)
The proposal would further strengthen the existing industry ban (Art. 33 FINMASA) and broaden the scope of disgorgement of profits (Art. 35 FINMASA). For industry bans, the aim is to reinforce the importance of internal rules that are relevant for supervisory purposes and thereby promote good corporate governance. Inconsistencies with the existing activity ban for traders and client advisers (Art. 33a FINMASA) would be removed. For disgorgement, the range of persons concerned would be widened to remove incentives to generate profits through breaches of supervisory law.
The proposal contains two specific changes to industry bans. First, FINMA could impose a ban not only for a serious breach of supervisory provisions but also for a serious breach of internal rules that are relevant for supervisory purposes. Second, the current maximum duration of five years would be removed. In repeat cases, an industry ban could also be imposed permanently, as is already possible for an activity ban. For natural persons, the scope of disgorgement (Art. 35 of the draft FINMASA) would be extended from persons in senior positions to all employees. This would also apply where a loss was avoided through a serious breach of supervisory law.
Information and reporting obligations
The proposal would extend the duty to provide information to FINMA to employees of supervised entities since in practice such entities can act only through their employees. The extension is intended to align the law with practice, increase legal certainty and facilitate FINMA’s access to relevant information outside formal proceedings. Furthermore, changes to the reporting duty would increase the individual accountability of persons subject to the fit-and-proper requirement.
Under Art. 29 para. 1 of the draft FINMASA, not only supervised entities themselves but also all their employees, including members of the board of directors and executive management and other persons subject to the fit-and-proper requirement, would be required to provide FINMA with all information and documents it needs to perform its supervisory duties. A similar duty on employees to provide information already exists in relation to the Federal Audit Oversight Authority under Art. 15a para. 1 let. c of the Audit Oversight Act. The reporting duty under Art. 29 para. 2 of the draft FINMASA, namely the obligation to notify FINMA without delay of incidents of substantial importance to supervision, would expressly apply personally to every individual subject to the fit-and-proper requirement. Other employees would continue to have no personal reporting duty. Corresponding extensions are also proposed in relation to the supervisory organisations responsible for supervising portfolio managers and trustees.
Since the duty of natural persons to cooperate entails a risk of self-incrimination, Art. 38a of the draft FINMASA provides for a restriction on the use of evidence: self-incriminating information obtained by FINMA under threat of a criminal sanction could not be used against those persons in parallel or subsequent criminal proceedings. By contrast, pre-existing documents whose existence is known to the criminal prosecution authority would remain admissible. This would also apply where those documents were produced under threat of criminal sanction. The explanatory report further clarifies that supervised entities may not make their cooperation with FINMA conditional on FINMA threatening them with a criminal sanction.
Outlook
The proposal would significantly expand FINMA’s supervisory toolkit. For institutions, responding promptly to supervisory concerns would become even more important. Internal reporting channels and responsibilities should ensure that relevant incidents are identified, and FINMA orders implemented within the applicable deadlines. The personal duties of individuals subject to the fit-and-proper requirement should be aligned with the institution’s reporting processes. In enforcement proceedings, potential fines and the proposed general rule of public disclosure would need to be considered at an early stage in both procedural and communications strategy. Cooperation beyond statutory obligations and a settlement could offer financial benefits. At the same time, the scope of the duties to cooperate and protection against self-incrimination would remain central for institutions and the individuals concerned.
Many details, such as the calculation and reduction of fines, would only be determined at ordinance level. Following the consultation, the Federal Council intends to submit its dispatch to Parliament in 2027. According to the timetable published by the Federal Department of Finance, the legislative amendments could enter into force in early 2029 at the earliest. The legislative process will determine whether, and in what form, the new instruments become law.
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