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The proposals submitted for consultation by the Federal Council on 22 December 2010 were in principle largely positively received by the interested circles. Changes were proposed to individual items. The Federal Council maintained the general thrust of the bill, but made a few adjustments.
The key focus of the bill is on four core measures:
For implementation of the more stringent capital requirements, various instruments need to be provided for in the Banking Act (reserve capital and convertible capital). The Federal Council is proposing tax measures to promote the issue of bonds, and thus also CoCos, in Switzerland as well as to boost the Swiss capital market. Switzerland as a business location will also benefit from this.
In addition, the bill includes regulation of the remuneration of those systemically important banks that have to be bailed out using federal funds despite all efforts to strengthen financial sector stability. In such cases, the Federal Council will be obliged to order that adjustments be made to the remuneration system of the bank in question. The bill is largely based on the recommendations of the Commission of Experts, which submitted its final report to the Federal Council on 30 September 2010.
With the adoption of the dispatch for parliament, the bill can be considered by the first chamber during the summer session and by the second chamber during the autumn session in 2011. The legislative amendments could thus come into force at the start of 2012 at the earliest. Transition periods up to 2018 should facilitate implementation.
Adjustments as a result of the consultation
Some of the adjustments and clarifications made by the Federal Council are as follows:
The FDF and the State Secretariat for Economic Affairs (SECO), together with FINMA and the Swiss National Bank, analysed the economic implications of the planned regulation in a report. As a result of the proposed measures, massive consequential costs of severe financial crises can be avoided for the entire economy. While the costs for systemically important banks will increase in the short term, investor confidence will increase over the long term, constituting a competitive advantage for Switzerland's financial centre and the institutions affected. The implications for domestic lending are considered to be minor in the short to medium term. No negative repercussions are expected longer term. The analysis shows that the long-term benefits for the national economy exceed the cost of the measures.
 CoCos (contingent convertible bonds) are bonds that are converted into equity capital or written off after a specific event occurs (when a threshold, or trigger, is reached).