FINMA as a resolution authority

FINMA authorises and supervises financial intermediaries on the Swiss financial markets. If a financial intermediary fails or operates without a licence, it is responsible for ensuring an orderly market exit by ordering a liquidation or insolvency. Before reaching this stage, FINMA will support recovery efforts by the institution and examine whether a restructuring is likely to be successful.

Financial intermediaries on the Swiss financial markets are regulated by FINMA. They require a licence to operate and are subject to supervision. FINMA is also charged with recovery and resolution in the form of a restructuring or liquidation (solvent compulsory liquidation or bankruptcy) if circumstances require it. If an institution gets into difficulties, FINMA helps it to ensure its stability on a sustainable basis via a recovery. If there is a risk of insolvency, FINMA can order protective measures or a restructuring. If a financial intermediary fails or does not have the proper licence, FINMA is responsible for ensuring an orderly market exit via insolvency or compulsory liquidation.

Voluntary liquidation, compulsory liquidation and insolvency

If the conditions for an institution’s bankruptcy are not met, it can give up its licence voluntarily at any time and liquidate itself under FINMA’s oversight. If a solvent institution does not meet the licensing requirements or if it is operating without the requisite licence, FINMA withdraws its licence as part of its resolution activities and orders its compulsory liquidation. This is carried out by a liquidator appointed by FINMA in most cases.

FINMA is also the bankruptcy agency for most financial intermediaries. If the intermediary is over-indebted or illiquid, FINMA is required to place it into bankruptcy. However, FINMA will first evaluate whether a restructuring is possible and feasible. The aim is not necessarily for an institution to continue in its existing form. The restructuring plan may involve a change in the institution’s business model or organisational and ownership structure. After a successful restructuring, the institution can be returned to regular supervision and continue to operate on the financial markets. If the restructuring is unsuccessful, FINMA is responsible for winding down the firm.

Protection of clients, creditors and the financial system

All of FINMA’s efforts to recover licence holders and any resolution steps directed by it have the goal of protecting clients and creditors as well as safeguarding the integrity of the financial system, i.e. the orderly functioning of the financial markets and financial stability. For obvious reasons, financial regulation cannot entirely mitigate the risk of a financial intermediary failing, and nor would this be desirable. On the contrary, company failures are an integral part of a free market economy. FINMA strives to ensure that market exits are as orderly as possible.