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Expected impact on Swiss Banks
- We currently expect divergence in the impact on RWA across the Swiss banking sector, depending on a number of factors such as the composition of the credit risk portfolios, as well as the magnitude of market and operational risks. Currently, on average, we expect credit risk RWA to stay largely flat, whilst market and operational risk to increase slightly. A principle of “capital neutrality” was agreed in Switzerland, although in practice this remains a challenge to achieve at an individual bank level, and hence is still a discussion point for the industry.
- Planned changes for the standardized approaches will impact all Swiss banks, adding new calculation approaches (e.g. SMA), as well as process requirements and additional data to be collected in order to comply with new calculation requirements.
- Due to changes in model requirements and increased complexity in calculations, an increased model governance as well as more stringent data management framework will be necessary. Further, more detailed disclosures in Pillar 3 reporting is to be expected for most Swiss banks.
- In general, principles of proportionality may apply to all category 4 and 5 banks, and to a certain extent also to category 3 banks.
The changes required to comply with the finalized Basel III rules emphasize the need for comprehensive management and capital underpinning of financial and non-financial risks. Banks can position themselves for the future by designing a risk management function that can adapt to these requirements whilst supporting the business. If no actions have been undertaken to date, then this work should begin without further delay.