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Swiss lawmakers agree to ban bonuses at too-big-to-fail banks

House of Representatives
The proposal from the centre-left Social Democrats was supported by 101 lawmakers, with 70 against, and now goes to the Senate for approval, in which case it would become law. Keystone / Peter Klaunzer

The House of Representatives passed a bill on Tuesday to ban systemically relevant banks from paying some bonuses, limiting payouts for top executives and risk managers.

The proposal from the Social Democrats was supported by 101 lawmakers, with 70 against, and now goes to the Senate for approval, in which case it would become law. 

Switzerland has just weathered a crisis which forced the fusion of its two biggest financial institutions. Credit Suisse Group AG was taken over by UBS Group AG after becoming the first global systemic bank to near collapse since the 2008 market turmoil. 

Swiss government orders freeze on Credit Suisse bonus payments

The implicit state guarantee received by large banks means that any risk such institutions take ultimately falls to taxpayers, said Prisca Birrer-Heimo of the Social Democrats, who submitted the proposal.

+ How the Swiss ‘trinity’ forced UBS to save Credit Suisse

The government is itself mulling legal options to limit big bank bonuses, so the bill has been “surpassed by recent events,” Finance Minister Karin Keller-Sutter told lawmakers. 

Aside from Credit Suisse and UBS, other institutions designated by the Swiss National Bank as systemically important are Raiffeisen Group, Zuercher Kantonalbank and PostFinance. That label means that they are already required to hold higher capital and liquidity buffers and maintain recovery and emergency plans.

©2023 Bloomberg L.P.

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