FINMA’s supervision and enforcement practice towards private banks

Risk-based supervision

FINMA supervises banks according to a risk-oriented approach that divides them into five categories. Category 1 comprises extremely large, important and complex market participants, category 2 very important and complex participants, category 3 large and complex participants, category 4 medium-sized participants and category 5 small participants. The criteria are total assets, assets under management, privileged deposits and required capital, as set out in Annex 3 of the Banking Ordinance. Institutions in categories 1 and 2 are supervised continually and intensively, while those in category 5, which form the vast majority, are supervised mainly through quantitative indicators and examined more closely only when rules are breached or extraordinary events occur.¹ Most Zurich private banks fall into categories 3 to 5. Small, well-capitalised and liquid banks in categories 4 and 5 may participate in a small banks regime that exempts them from the calculation of risk-weighted assets and the net stable funding ratio, provided they maintain a simplified leverage ratio of at least 8 per cent and an average liquidity coverage ratio of at least 110 per cent.² For private banks with conservative balance sheets, this regime has lowered the prudential burden.

The categorisation does not measure conduct risks. A small private bank with a high share of politically exposed persons or clients from high-risk jurisdictions can pose a considerable risk to the reputation of the financial centre, although its failure would pose no systemic risk. FINMA therefore complements the prudential categories with supervisory priorities for money laundering, sanctions and cross-border risks, which it sets on the basis of its assessment of risk exposure. It relies heavily on the regulatory audit firms that examine each bank annually, while carrying out on-site inspections of its own. In 2025 FINMA conducted 113 on-site inspections at banks, 42 of them at UBS, and 20 in the asset management sector. It concluded 55 enforcement proceedings, imposed institution-specific capital add-ons in 14 cases and ordered restrictions on business activity or bans on acquisitions in seven cases.³ The same report recorded more than 300 new entries on the warning list, a record.

FINMA’s enforcement instruments are limited by international standards. The authority cannot impose fines. It can issue declaratory rulings finding a serious breach of supervisory law, order the confiscation of profits obtained through such a breach, prohibit individuals from holding management positions, restrict business activities, appoint an independent third party to monitor the implementation of measures and, as a last resort, withdraw the licence. FINMA has asked for the power to impose fines and for an accountability regime for senior managers, which the reform of the banking regulatory framework after the collapse of Credit Suisse is to introduce.⁴ Until such powers are granted, the reputational effect of FINMA’s findings and the restrictions on acquisitions are the most effective sanctions against a private bank.

The corruption cases: Petrobras, 1MDB, PDVSA and FIFA

The enforcement cases of the decade after 2015 showed that the end of tax secrecy had not ended the risk that Swiss private banks would be used to hide illegal money. The new risk came from corruption. In a series of cases involving the Brazilian oil company Petrobras, the Malaysian sovereign fund 1Malaysia Development Berhad (1MDB), the Venezuelan state oil company PDVSA and the international football association FIFA, investigations revealed that bribes and embezzled public funds had passed through accounts at several Swiss banks, many of them in Zurich, Geneva and Lugano.

The 1MDB case produced the most drastic measures. On 24 May 2016 FINMA found that BSI AG, a Lugano bank, had seriously breached money laundering regulations by executing numerous large transactions with unclear purposes over several years without adequate clarification. It ordered the confiscation of CHF 95 million in unlawfully obtained profits and approved the takeover of BSI by EFG International on condition that BSI be fully integrated and dissolved within twelve months. FINMA opened enforcement proceedings against two former senior managers and reported that it had examined more than twenty Swiss banks in connection with 1MDB and opened proceedings against six. On the same day, the Monetary Authority of Singapore announced the withdrawal of BSI’s licence in Singapore.⁵ The Federal Administrative Court later criticised FINMA’s method of calculating the confiscated profit and referred the case back to FINMA for a new calculation.⁶ Proceedings concerning 1MDB followed against Falcon Private Bank in Zurich in 2016, against Rothschild Bank AG in Zurich in 2018 and against other institutions. Falcon later withdrew from Swiss private banking.⁷

Credit Suisse, then still one of the two big banks, was the subject of two enforcement procedures that FINMA concluded on 17 September 2018. The first concerned business relationships connected with the FIFA corruption cases, Petrobras and PDVSA between 2006 and 2016. FINMA found deficiencies in the identification of clients and beneficial owners, in risk categorisation and in documentation. It noted that the former Clariden Leu subsidiary, a Zurich private bank integrated into Credit Suisse in 2012, showed above-average levels of fault. The second procedure concerned a major politically exposed client whose risks the bank had identified late and whose relationship manager had repeatedly breached compliance rules without adequate consequences. FINMA ordered the bank to remediate its controls, to introduce a comprehensive single view of each client across all functions by the end of 2019 and to accept an independent third party to monitor the implementation.⁸

Julius Bär received the most detailed findings. On 20 February 2020 FINMA concluded enforcement proceedings concerning the period from 2009 to early 2018, in which the bank had been involved in the PDVSA and FIFA corruption cases. FINMA examined 70 business relationships selected on a risk basis and more than 150 transactions and found deficiencies in almost all of them, including incomplete client identification, inadequate transaction monitoring and a failure to clarify suspicious activities despite warning signs. It also found that the bank’s remuneration system had rewarded financial success over compliance. One client adviser responsible for Venezuelan clients had continued to receive compensation in the millions after FINMA had drawn the bank’s attention to his clients, with his bonus reduced by only 2.5 per cent in 2017. FINMA ordered the bank to identify and assess high-risk client advisers, to overhaul its remuneration and disciplinary policies and to create a board committee for conduct and compliance. It prohibited the bank from making large acquisitions until the lawful situation had been restored and appointed an independent auditor to monitor the implementation.⁹ In May 2021 the bank concluded a deferred prosecution agreement with the United States Department of Justice concerning the FIFA case, under which it paid more than USD 79 million.¹⁰

Credit risk in private banking: the Signa case

A different kind of risk came to light at Julius Bär in 2023 and 2024. The bank had granted private debt loans, a line of business that had grown within the private bank, to companies of the Signa group of the Austrian investor René Benko, whose real estate and retail empire collapsed into insolvency from the end of 2023. After the bank had written off about USD 700 million of these loans, its chief executive, Philipp Rickenbacher, left. Stefan Bollinger took over as chief executive in January 2025. On 3 February 2025, FINMA opened enforcement proceedings against the bank after lengthy investigations, which reportedly found that business and control functions had not been sufficiently separated.¹¹ The bank announced a new strategic direction in June 2025, including the simplification of its operating model, changes to its compensation mechanisms and programmes on culture and conduct.¹²

The Signa case matters for the law of private banking because it concerned the balance sheet risk of a wealth manager. Private banks traditionally lend against securities portfolios, a business whose risks are limited by haircuts and margin calls. Loans to entrepreneurs and their companies, often granted to win or retain a wealthy client, carry the concentration and valuation risks of corporate lending without always being subject to the same credit processes. FINMA’s intervention showed that the authority expects private banks to apply the same separation of front office and risk control to such loans as a commercial bank would. It also illustrated the limits of the FINMA toolbox, since the authority could open proceedings and impose measures but could not fine the bank.

Lessons of the enforcement cases

The enforcement cases of the past decade have produced a body of supervisory expectations that now shapes the organisation of every Zurich private bank. Banks must know the source of wealth and the source of funds of each client and must be able to demonstrate this knowledge. They must classify politically exposed persons and other high-risk clients, subject them to enhanced due diligence and have the relationships approved at senior level. Transaction monitoring must be automated and capable of identifying patterns across accounts and legal entities belonging to the same client. Remuneration systems must not reward client advisers who bring in money without regard for compliance. The bank must also be able to identify advisers whose behaviour presents an increased risk. Finally, the board of directors must take responsibility for conduct risk as a strategic issue. Detailed anti-money laundering law is the subject of Part I of this book. For present purposes, the point is that these expectations have become a central part of the cost base and the competitive position of private banks, because only institutions that can meet them at a reasonable cost can serve international clients.

Notes

1. FINMA, “Categorisation of banks and securities firms”, https://www.finma.ch/en/supervision/banks-and-securities-firms/categorisation/. ↩
2. FINMA, “Cat. 4 and 5 / Small banks regime”, https://www.finma.ch/en/supervision/banks-and-securities-firms/kat-4-und-5-kleinbankenregime/. ↩
3. FINMA, “FINMA annual media conference 2026”, media release, 21 April 2026, https://www.finma.ch/en/news/2026/04/20260421-mm-jmk-2026/; swissinfo.ch, “Swiss financial regulator significantly more active in 2025”, https://www.swissinfo.ch/eng/various/finma-closes-significantly-more-proceedings-in-2025/91289905, which notes that FINMA had concluded 38 proceedings in 2024. ↩
4. FINMA, annual media conference 2026 (n. above). On the reform package and the senior managers regime, see Part G of this volume. ↩
5. FINMA, “BSI in serious breach of money laundering regulations”, media release, 24 May 2016, https://www.finma.ch/en/news/2016/05/20160524-mm-bsi/. The release also records that the Office of the Attorney General of Switzerland had opened criminal proceedings. ↩
6. Federal Administrative Court, media release “BSI case: FINMA’s approach is incomprehensible”, 3 December 2019, https://www.bvger.ch/en/newsroom/media-releases/bsi-case-finma-s-approach-is-incomprehensible-1108. The court partially upheld the appeal against the confiscation of CHF 95 million and referred the case back to FINMA for a new calculation of the profits. ↩
7. FINMA, “Falcon sanctioned for violations in relation to 1MDB”, media release, 11 October 2016, https://www.finma.ch/en/news/2016/10/20161011-mm-falcon/; swissinfo.ch, “Rothschild bank sanctioned for role in 1MDB scandal”, 20 July 2018, https://www.swissinfo.ch/eng/business/finma-ruling_rothschild-bank-sanctioned-for-role-in-1mdb-scandal/44269968; swissinfo.ch, “Falcon exits Swiss private banking after 1MDB scandal”, 12 May 2020, https://www.swissinfo.ch/eng/business/talks-with-rival_falcon-exiting-swiss-private-banking-after-1mdb-scandal/45754378. ↩
8. FINMA, “FINMA finds deficiencies in anti-money laundering processes at Credit Suisse”, media release, 17 September 2018, https://www.finma.ch/en/news/2018/09/20180917-mm-gwg-cs/. ↩
9. FINMA, “Serious AML failings at Julius Baer”, media release, 20 February 2020, https://www.finma.ch/en/news/2020/02/20200220-mm-jb/. ↩
10. United States Department of Justice, “Bank Julius Baer Agrees to Pay More than $79 Million for Laundering Money in FIFA Scandal”, press release, 27 May 2021, https://www.justice.gov/archives/opa/pr/bank-julius-baer-agrees-pay-more-79-million-laundering-money-fifa-scandal. The deferred prosecution agreement provided for a fine of USD 43.32 million and forfeiture of USD 36.37 million. ↩
11. swissinfo.ch, “Swiss bank watchdog steps up Signa action against Julius Bär”, https://www.swissinfo.ch/eng/banking-fintech/swiss-bank-watchdog-steps-up-signa-action-against-julius-b%C3%A4r/88819264; swissinfo.ch, “Julius Baer’s Fine in Money Laundering Case Compounds Legal Woes”, https://www.swissinfo.ch/eng/julius-baers-fine-in-money-laundering-case-compounds-legal-woes/89316567, which records the appointment of Noel Quinn as chairman in May 2025. ↩
12. finews.asia, “Julius Baer: Profit Drops While AUM Hits Record in 2025” (n. above). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.