Contributed By Homburger
Capital requirements for Swiss banks and securities dealers are set out in the Capital Adequacy Ordinance (CAO). As a general rule, Article 49 et seq of the CAO provide that securitisation positions must be risk-weighted, with FINMA being competent to issue implementing provisions with respect to the risk weighting. The implementing provisions are contained in FINMA Circular 2017/07 'Credit Risk – Banks'. The basic rule set out in the Circular is that the Basel standards apply, including the 2016 Basel securitisation framework and rules relating to simple, transparent and comparable securitisations (STC securitisations) as well as pillar two requirements (cf, Basel II framework paragraphs 784-807 and related amendments pursuant to the revisions to the securitisation framework of 11 December 2014, as further revised in July 2016 and amended by the rules on "capital treatment for short-term simple, transparent and comparable securitisations" of May 2018.
As far as the Basel rules provide for optionality in the national implementation, FINMA Circular 2017/07 'Credit Risk – Banks' provides that banks may use a securitisation external ratings-based approach (SEC-ERBA) if the bank has the necessary expertise and an adequate internal process to verify ratings and rating methodologies applied, and applicable operational requirements are complied with.