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Regulatory analysis · Swiss supervision

What FINMA cannot do

August 2026·CH · EU · UK
FINMASupervisionEnforcementCredit SuisseSwitzerland

Switzerland's financial supervisor cannot fine anyone. Not a bank, not a banker. As this is written, a consultation is open that would change that — and the Credit Suisse case that forced it is still unresolved before the Federal Supreme Court.

Below: what FINMA can actually do, what it cannot, how the gap was built, and what is now proposed to close it.

The consultation that is open now

On 12 August 2026 the Federal Council opened a consultation on amending the Banking Act and the Liquidity Ordinance. It closes on 19 November 2026.

Three of its proposals go to the heart of what FINMA lacks:

ProposalWhat it would do
Pecuniary administrative sanctionsFINMA could impose fines on culpable institutions — the instrument it has never held
Senior manager accountabilityBanks with 250 or more employees must document in writing who is responsible for which decisions
Duty to informFINMA would be obliged to inform the public about concluded proceedings

The package also carries enforcement charges for institutions that delay implementing ordered measures.

Nothing here is law. The dispatch to Parliament is expected in 2027; the earliest realistic entry into force is 2029. A reader who takes from the headlines that FINMA is about to acquire fining powers has read them too quickly. What exists today is a consultation draft.

What FINMA can do

FINMA's enforcement instruments sit in Arts 31–37 FINMASA. They are not trivial.

ArticleInstrument
Art. 31Restoration of compliance (Wiederherstellung des ordnungsgemässen Zustandes) — the workhorse provision
Art. 32Declaratory ruling and substituted performance
Art. 33Industry ban on individuals, maximum five years (Art. 33(2))
Art. 34Publication of the supervisory ruling
Art. 35Confiscation of profit made through serious breach
Art. 36Appointment of an investigating agent
Art. 37Withdrawal of licence, recognition, authorisation or registration

Licence withdrawal ends a firm. An industry ban removes an individual. Publication damages reputations that took decades to build. These are real powers.

What FINMA cannot do

It cannot fine. Art. 35 permits confiscation of profit — a disgorgement, stripping a gain — not a penalty calibrated to deterrence. The distinction is not academic: disgorgement caps recovery at what was earned, so a breach that produced no measurable profit produces no financial consequence at all.

The Financial Stability Board put it plainly in its Peer Review of Switzerland of 29 February 2024: FINMA's "supervisory and punitive instruments are more limited than its peers. For example, FINMA cannot impose fines (apart from the disgorgements described above)." The FSB also found that, unlike peers, FINMA "generally cannot report publicly on individual enforcement proceedings", and recommended both a senior managers regime and a power to publish.

FINMA also lacks coercive investigative powers. It cannot search premises or seize evidence; those require the criminal authorities.

How the gap was built

This was designed, not overlooked.

FINMA began operating on 1 January 2009, merging the Federal Banking Commission, the Federal Office of Private Insurance and the Anti-Money Laundering Control Authority. Its statute, the Financial Market Supervision Act of 22 June 2007 (FINMASA, SR 956.1), came into force in stages — the organisational provisions from 1 February 2008, the remainder from 1 January 2009. Its constitutional footing is Art. 98 of the Federal Constitution, headed "Banks and insurance companies", under which the Confederation legislates on the banking and stock exchange system while taking account of the special role of the cantonal banks.

Art. 4 FINMASA sets the objectives: protection of creditors, investors and insured persons, and protection of the proper functioning of the financial markets. A second sentence adds that supervision thereby contributes to the standing, competitiveness and future viability of the Swiss financial centre. That is framed as a consequence of good supervision, not a free-standing mandate — a distinction worth holding when the competitiveness argument is deployed against reform.

The separation of supervision from punishment is deliberate. Art. 50 FINMASA makes the Federal Department of Finance the prosecuting and adjudicating authority for financial-market criminal offences under administrative criminal law, with referral to the Office of the Attorney General where a custodial sentence is in prospect. Art. 38(3) obliges FINMA to notify prosecutors of offences it discovers. Criminal insider dealing and market manipulation reach the Attorney General by a different route, under Art. 156 FinfraG.

The theory was clean: FINMA prevents, prosecutors punish. Expert reports in 2004 and 2014 both concluded FINMA should not have fining powers, reasoning that a punitive function would engage the privilege against self-incrimination and hobble administrative proceedings.

On accountability, one common description is simply wrong. FINMA is often said to report to Parliament rather than the Federal Council. It does not. The Federal Council elects the Board of Directors (Art. 9(3)), FINMA discusses strategy with the Federal Council annually and deals with it through the Federal Department of Finance (Art. 21(2)–(3)), and the federal chambers exercise only Oberaufsicht — high-level superintendence — under Art. 21(4). FINMA is independent in the exercise of supervision (Art. 21(1)). It is not answerable to Parliament in any line sense.

The night the hierarchy inverted

On 19 March 2023, as Credit Suisse was folded into UBS, FINMA ordered the complete write-down of the bank's Additional Tier 1 capital — around CHF 16 billion nominal, which the Federal Administrative Court later put at CHF 16.5 billion. Shareholders received approximately CHF 3 billion in UBS shares.

Bondholders were wiped out. Equity was not.

The sequence is documented in the instruments themselves. The Federal Council's emergency ordinance of 16 March 2023 (SR 952.3) was amended on 19 March by AS 2023 136, which records its own entry into force as 19 March 2023, 20:00. The new Art. 5a empowered FINMA to order the write-down of additional core capital. FINMA's decree followed at 22:01 — a timing recorded in the court's own judgment, not merely in press accounts.

Two things are worth separating, because they are routinely conflated. On 16 March Credit Suisse announced it would draw up to CHF 50 billion from the Swiss National Bank under an existing Covered Loan Facility. The emergency ordinance did something different: it created additional liquidity assistance loans and a public liquidity backstop secured by a federal default guarantee, instruments of a different order of magnitude.

The bank was not short of capital on paper. Its BIS CET1 ratio was 14.1% at the end of the fourth quarter of 2022, with a three-month average liquidity coverage ratio of 144% — a figure the earnings release itself notes had improved from lower levels earlier in the quarter. What failed was confidence, after the chairman of Saudi National Bank said on 15 March that his institution would "absolutely not" provide further funds.

What the court decided — and what it did not

On 1 October 2025 the Federal Administrative Court handed down a partial decision in B-2334/2023, brought by roughly 3,000 complainants across some 360 cases. It confirmed the complainants' right to appeal and revoked FINMA's decree.

Its findings were unsparing:

  • The contractual viability event had not been triggered: "at the time of the write-off, CS was sufficiently capitalised and met regulatory capital requirements."
  • The federal and SNB measures "served solely to ensure liquidity" and had no direct effect on the equity base.
  • Art. 26 of the Banking Act addressed "a different subject matter" and was "in any event too vague" to support a write-off of third-party rights under the principle of legality — the same applying to Art. 31 FINMASA and Art. 5a of the emergency ordinance.
  • Art. 5a was unconstitutional in several respects, engaging the limits on Federal Council emergency ordinances (Arts 184(3) and 185(3) FC), the delegation of expropriation rights (Art. 178(3) FC) and the guarantee of ownership (Art. 26 FC).
  • "The bondholders' property rights were seriously interfered with, which would have required a clear and formal legal basis. But no such basis existed."

Three qualifications matter, and they are usually dropped. The decision is a Teilentscheid — a partial decision. The court has not yet ruled on whether the write-off should be reversed. Its treatment of Art. 5a was a preliminary, incidental constitutional review: Swiss courts cannot strike down federal enactments, so the provision was disapplied in this case, not voided. And a revoked decree is not a restored bond.

Where the litigation actually stands

As at August 2026, the bondholders have recovered nothing.

Both FINMA and UBS appealed to the Federal Supreme Court — this is not, as often reported, a FINMA-only appeal. On 22 October 2025 the Federal Administrative Court suspended every pending AT1 case except B-2334/2023. On 10 December 2025 the Federal Supreme Court granted suspensive effect to UBS's appeal on legal-certainty grounds. The practical consequence is blunt: the AT1 instruments remain written off and worthless. In March 2026 the Federal Supreme Court refused FINMA's request to join the Federal Department of Finance to the proceedings, holding that the Confederation's liability was not the subject matter.

No judgment has been handed down. No date has been announced.

The parallel US action is over. Quinn Emanuel brought a claim in the Southern District of New York in June 2024 against the Swiss Confederation, amended upward from USD 82 million to USD 372 million. It was dismissed, and in July 2026 the US Court of Appeals affirmed on sovereign-immunity grounds, holding that Switzerland had acted in a sovereign rather than commercial capacity.

Europe's supervisors distanced themselves within a day. The ECB, the Single Resolution Board and the EBA issued a joint statement on 20 March 2023: "Common equity instruments are the first ones to absorb losses, and only after their full use would Additional Tier 1 be required to be written down."

The warnings, and their dates

Precision about vintage matters here, because the staffing critique is frequently made with numbers that are now fourteen years old.

The IMF's Country Report No. 14/264 of September 2014 assessed Switzerland against the Basel Core Principles and rated Core Principle 2 — independence, accountability, resourcing and legal protection — Materially Non-Compliant. It was the only principle to receive that grade. The report recorded bank-related staff rising "from around 87 FTE in 2010 to 98 FTE in 2012", and total resource allocated to the two largest banks of "around 30" FTE. Those are 2012 figures.

The position has changed. FINMA's Annual Report 2025 records 617 average full-time positions in 2025, up from 554 in 2024 — an increase of about 11%, directed expressly at conducting more of its own on-site inspections and in-depth risk analysis. That is a direct answer to the criticism that FINMA leaned too heavily on external audit firms as its "extended arm". Note that 617 is FINMA-wide and not comparable with the 98 banking-supervision figure. A newer IMF assessment also exists — Country Report No. 2025/266, the Financial System Stability Assessment.

The Parliamentary Investigation Committee reported on 17 December 2024 in a 569-page study of the federal authorities' conduct during the crisis. On FINMA's 2017 grant of a capital "regulatory filter" to Credit Suisse, the committee identified "an extensive interpretation of the legal bases" and judged the decision unzweckmässig — inexpedient. On enforcement, it recorded eight proceedings against Credit Suisse management in the period, three closed when the individuals signed declarations of renunciation and five still open, and regretted that FINMA had not succeeded in enforcing supervisory-compliant business practice despite them.

For the practitioner

The comparison with the FCA needs care. It is often said that the FCA fined NatWest £264.8 million for anti-money-laundering failures where FINMA could not. That was not an administrative fine. It was the FCA's first criminal prosecution under the Money Laundering Regulations 2007; NatWest pleaded guilty and was sentenced at Southwark Crown Court on 13 December 2021, the penalty reduced by a third for the plea. FINMA can also refer matters for criminal prosecution, under Art. 38(3) FINMASA. The genuine distinction lies in the FCA's separate administrative fining power under FSMA — and that is the comparison to draw.

Read the timetable, not the announcement. The reform has advanced twice in 2026: the dispatch on the Banking Act revision was adopted on 22 April, and the consultation carrying the fining power opened on 12 August. Neither is law. Any assessment of Swiss supervisory risk written before 2029 should assume the current toolkit.

The precedent risk sits in the emergency ordinance, not the write-down. The court's most consequential holding is not that Credit Suisse was adequately capitalised. It is that Art. 5a failed constitutional requirements for Federal Council emergency ordinances and for delegated expropriation. That reasoning reaches every future crisis in which the Federal Council legislates overnight.

Key takeaways

  • FINMA has no power to fine. Its pecuniary instrument, under Art. 35 FINMASA, is confiscation of profit — a disgorgement, not a penalty.
  • A consultation that would grant a fining power and a senior manager regime is open until 19 November 2026. Entry into force is unlikely before 2029.
  • The Federal Administrative Court revoked FINMA's AT1 decree in a partial decision, B-2334/2023, on 1 October 2025. It has not ruled on reversal.
  • The Federal Supreme Court granted suspensive effect in December 2025. The bonds remain worthless and no judgment has issued.
  • The staffing critique rests on 2012 data. FINMA employed 617 average FTE in 2025, up 11% year on year.

Sources

Legislation and ordinances

Court

Supervisors and assessors

Parliament and reform

Scholarship

Research and analysis, not legal advice · positions stated as at 23 August 2026 · check the SR texts in force.

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