On 6 June 2025, the Swiss Federal Council unveiled a comprehensive package of proposals to strengthen the country's banking regulation in the wake of the Credit Suisse crisis. A central pillar of the proposed reform is the introduction of a Senior Managers Regime (SMR).
1. Senior Managers Regime
Under the proposed regime, banks would be required to assign clearly defined and documented responsibilities to its top-level executives. The focus would be on central functions of the bank and would be limited to the level of senior management (including the board of directors, the executive committee, the heads of control functions and the heads of the main business divisions). The exact scope of individuals subject to the SMR would be determined based on the structure, size and business model of each bank. The assigned responsibilities would have to be appropriately documented, submitted to the Swiss Financial Market Supervisory Authority (FINMA) and updated as required.
2. Objective
The objective of the SMR is to enable FINMA to more effectively
hold individuals accountable for regulatory breaches,
mismanagement, or governance failures, thereby improving corporate
governance and risk culture within banks.
Although instruments establishing individual responsibility and
accountability already exist under the current legal regime, FINMA
has found that it was often difficult in practice to prove a causal
link between the actions of an individual within a bank and the
serious violation of supervisory law required to trigger the
application of the instruments at its disposal. By formalizing in a
legally binding manner who is responsible for which decisions, the
SMR is supposed to facilitate the attribution of misconduct to
accountable individuals by both the bank and FINMA.
3. Remuneration-related measures
Complementing the SMR, the reform package foresees several
enhanced enforcement tools for FINMA. These notably include
stricter rules on variable remuneration (bonuses) for systemically
important banks, which would be required to apply mandatory
retention periods to at least some parts of the bonuses to be paid
out, with the possibility to reduce or cancel deferred bonuses and
to claw back bonuses already paid out. The implementation of these
rules would be performed by the bank, either directly or upon
FINMA's decision.
The Swiss Federal Council indicates that the SMR must be closely
interlinked with the remuneration system and, in case of identified
misconduct, the focus should be on remuneration-related measures
taken by the bank itself.
4. Public reception
FINMA has welcomed the proposals of the Swiss Federal Council
and committed to a pragmatic and proportionate implementation of
the SMR. Like the Swiss Federal Council, FINMA supports the
objective of avoiding unnecessary administrative burden,
particularly on smaller banks. Accordingly, FINMA has announced
that it will make templates available on its survey and application
platform (EHP) to assist institutions in efficiently meeting the
requirements related to the SMR. FINMA has also reassured that the
SMR would not result in automatic responsibility for the designated
individuals and that evidence of a breach of regulatory duties by
the responsible person would still be required.
Industry voices have expressed cautious support, warning against
regulatory overreach and stressing the importance of preserving
Switzerland's financial competitiveness.
5. Next steps
The Swiss Federal Council has announced that formal consultation
proceedings on the proposed measures will be launched in stages
from autumn 2025 onwards. Two draft bills to revise the Banking Act
are expected in the second half of 2025 (capital requirements
relating to foreign subsidiaries) and in the first half of 2026
(other measures, including the SMR). The proposed reforms will then
follow the standard legislative process, including parliamentary
debate and potential adjustments.
The introduction of an SMR would mark a significant shift in the
Swiss financial regulation by increasing the focus on personal
accountability of the senior management of banks. Schellenberg
Wittmer will continue to closely monitor these legal developments
and help clients anticipate the implications of these expected
regulatory changes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
