FINMA has announced today that it considers Zürcher Kantonalbank’s emergency plan to be ready to implement.
As a systemically important bank, Zürcher Kantonalbank is legally obliged to draw up an emergency plan with the aim of being able to continue systemically important functions in the event of imminent insolvency.
In previous years, Zürcher Kantonalbank already fulfilled the key requirements for an implementable emergency plan, and – according to FINMA – presented a plausible plan for how the necessary gone-concern capital (capital in resolution) should be built up in the event of an emergency. The entry into force of the partial revision of the Banking Act and the amendment of the Capital Adequacy Ordinance at the beginning of 2023 created the legal basis for issuing bail-in bonds for Zürcher Kantonalbank. These are debt instruments that were explicitly designed to bear losses in the event of insolvency measures.
The issue of bail-in bonds totalling around CHF 1.5 billion in 2023 has helped Zürcher Kantonalbank to build up the required gone concern capital in full without having to utilise transitional provisions. The emergency plan therefore meets the requirement for the uninterrupted continuation of systemically important functions in the event of imminent insolvency and was assessed by FINMA as being overall ready to implement (see FINMA press release).
“As a systemically important bank, Zürcher Kantonalbank is required to hold increased capital buffers,” says Martin Bardenhewer, Chief Financial Officer at Zürcher Kantonalbank. “With a risk-weighted total loss-absorbing capacity ratio (TLAC ratio) of 26.8% as of December 31, 2023, Zürcher Kantonalbank is excellently capitalised. The bank’s liquidity situation is also extremely robust. We are also pleased that FINMA considers our 2023 emergency plan to be feasible and evidence of the continuation of our systemically important functions in the event of imminent insolvency to have been provided.”