The Swiss banking regulator frequently is the target of complaints by banks and wealth managers. Now, some politicians want to stop the Bern-based authority in its tracks.

Politicians from several right-leaning parties have joined up to cut the rights of the Swiss banking regulator, known as Finma. 

The lower house of parliament on Tuesday passed a motion to take the regulatory powers away from Finma and to hand them to government and parliament, while leaving the banking authority with the sole right to supervise the financial market.

The government is opposed to this separation of powers. In a next step, the upper house – Switzerland’s regional representation – will be asked to discuss the motion.

Hampered by Lack of Expertise

Finance Minister Ueli Maurer in principle agrees that supervision and regulation ought to be separated. However, neither parliament nor the federal administration possess the necessary expertise to develop a regulatory framework for an industry that is comparatively huge and advanced in Switzerland.

The banking and asset management industries in recent years complained noisily about increased regulation and the powers of Finma. They have asked the main parliamentary supervising body to investigate whether the body, led by Marc Branson, is going beyond its legal rights by issuing circulars on various topics.

Branson is an ex-UBS banker with dual Swiss and British citizenship. He studied in the U.K. and later became the public face of UBS in 2010, when he apologized to a U.S. Senate panel for the Swiss bank's dealings with wealthy Americans.

One Size Doesn't Fit All

Finma says that circulars and decrees are part and parcel of a supervision that forms the basis of the rule of law. In reality, the body became much stronger and authoritative in the aftermath of the financial crisis of ten years ago. At the time, UBS, the country’s largest bank, had to seek state aid to survive, an event that shocked a country famed for its banking industry (and secrecy).

One of the main complaints of the Swiss banks is that Finma applies a broad brush for banks of all sizes, making small private banks liable to live up to the same capital requirements as the giant banks which are systemically relevant for the Swiss economy.