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.