FINMA Defends Small Bank Supervision with Concrete Figures
Small banks are inspected on-site far less often than large banks. FINMA Director Stefan Walter plans to explore further proportionality in supervision.
FINMA Presents Figures
The criticism is well-known: small banks face the same regulatory requirements and supervisory processes as large institutions, despite posing a significantly lower risk to the financial system. FINMA Director Stefan Walter explicitly addressed this criticism at the Small Bank Symposium on September 7, 2026.
"We repeatedly hear criticism that FINMA supervises small institutions too intensely," Walter said. FINMA takes this perception seriously, as the effort of an inspection weighs more heavily on a small institution than on a large one.
At the same time, Walter countered the criticism with specific figures. According to his statements, FINMA conducts over 40 on-site inspections per year at UBS. In contrast, a small bank is inspected on-site only every eight to ten years on average.
Walter aims to show that supervision does not focus on the smallest institutions, but on banks where size, complexity, or risks justify more intensive oversight.
Size Is Not The Only Factor
For FINMA, however, an institution's size is only one part of the risk assessment. The individual risk profile is also crucial.
Another figure from Walter's speech illustrates this: in 2025, FINMA conducted twelve times more on-site inspections at institutions with a medium or high-risk rating than at those with a low-risk rating.
Supervision thus operates on a principle FINMA calls "same risks, same rules." It is not solely about whether a bank is small or large, but about the risks arising from its business model and specific situation.
The Small Bank Regime Already Provides Relief
Proportionality is therefore not a new promise for FINMA. A key instrument is the small bank regime, which has been in place since 2020.
Currently, 56 banks and securities firms participate. Prerequisites include that institutions are particularly well-capitalized, liquid, and meet specific risk criteria.
In return, they receive concrete simplifications. Among other things, they do not have to calculate risk-weighted assets or comply with the Net Stable Funding Ratio. Simplified requirements also apply to disclosure, risk control, and internal auditing.
The logic behind this is simple: if a small and stable institution can achieve certain supervisory objectives with less effort, it should be able to utilize this flexibility.
Proportionality Does Not Mean Less Responsibility
At the same time, Walter draws a clear line. A smaller balance sheet does not automatically mean every risk is smaller.
This is particularly evident in money laundering, market conduct, and sanctions. In these areas, supervisory requirements generally apply regardless of an institution's size.
Smaller banks can also be exposed to specific risks concerning cyber risks and outsourced services. Precisely because smaller institutions more frequently rely on external technology and cloud providers, dependencies and concentration risks can arise.
For FINMA, proportionality therefore does not mean that small banks bear less responsibility. They must know and effectively manage their risks – but with structures appropriate to their size and complexity.
This Does Not Eliminate Criticism
The figures presented by Walter support risk-based supervision. However, they do not answer all questions from small banks.
Because the burden on a bank arises not only from on-site inspections. Reporting obligations, documentation, internal control systems, regulatory adjustments, and the implementation of new legal requirements also incur costs and tie up personnel.
This is precisely where a significant part of the political debate lies: even if FINMA inspects a small bank on-site much less frequently, implementing new regulatory requirements can be considerably more complex for it, relative to its size.
The question of proportionality therefore cannot be answered solely by the number of inspections. What also matters is the total effort required for an institution and what additional security gain individual requirements provide.
More Supervision After Credit Suisse Crisis
The debate gains additional weight because the federal government intends to strengthen bank supervision after the collapse of Credit Suisse.
In June 2025, the Bundesrat decided, among other things, to expand FINMA's powers in early interventions and grant it new options for administrative sanctions. Further measures concern the stabilization and resolution of systemically important banks, as well as capital and liquidity requirements.
The political tightrope walk is thus clear: Switzerland wants to prevent another major banking crisis from endangering the state and the national economy. At the same time, the response to the problems of large institutions should not lead to small regional and cantonal banks being burdened with unnecessary requirements.
Walter articulates this demand clearly: the problems of large institutions should not result in over-regulation of small ones.
What New Rules Mean for Small Banks
For smaller institutions, the current development therefore does not mean they will be exempt from new regulations in the future. Rather, how these rules are applied and designed is crucial.
This is precisely where Walter sees room for maneuver. Even for banks outside the small bank regime, the implementation of requirements should be differentiated according to size, complexity, business model, and risk profile.
FINMA thus aims to distinguish between two extremes: supervision that treats every institution according to the same procedures, and supervision that generally exempts small banks from requirements.
The Real Test Lies With New Risks
The challenge in the future will likely be less about whether small banks are fundamentally supervised differently. FINMA's figures show that this is already the case.
The more difficult question will be how quickly supervision reacts when a small institution's risk profile changes. Geopolitical tensions, cyberattacks, sanctions, dependencies on technology providers, and new business models can also become relevant for small banks.
An institution with a small balance sheet can therefore certainly pose a problem for its clients, even if it does not have systemic importance like a large bank.
Effective proportional supervision must therefore be able to do both: relieve small and solid institutions – and at the same time intervene quickly when risks genuinely increase.
FINMA Aims for More Data-Driven Approach
Walter's appearance also shows that FINMA intends to increasingly base its supervision on data. The authority wants not only to explain that it operates proportionally but to demonstrate through its supervisory activities how the differences between institutions are actually represented.
This is crucial for the small bank sector. It shifts the discussion from the general demand for "less regulation" to a more specific question: Which supervision is truly necessary for which risk?
This is ultimately how the principle of proportionality will be measured.
No Leniency – But More Appropriate Supervision
FINMA does not promise a free pass to small banks. Rather, it states that they are already supervised significantly less intensively than large institutions and that the individual risk profile further determines supervision.
At the same time, industry criticism remains relevant: regulation incurs costs even when no on-site inspection takes place. The crucial question is therefore not whether small banks are supervised less, but whether every additional regulatory effort is genuinely justified by a corresponding gain in security.
Walter formulated a clear guideline for this at the Small Bank Symposium: proportionality should not mean less supervision, but supervision that differentiates more precisely between risks.
After the Credit Suisse crisis, FINMA faces a difficult balancing act. It must strengthen supervision of the financial center without turning the mistakes of large banks into a burden for institutions that pose significantly lower systemic risks.
Sources
- FINMA: "FINMA's Small Bank Supervision: Proportionality as a Principle of Effective Supervision," speech by FINMA Director Stefan Walter, September 7, 2026.
- FINMA: "How does FINMA ensure proportional supervision?"
- FINMA: "Category 4 and 5 / Small Bank Regime," updated February 24, 2026.
- Bundesrat/Federal Department of Finance: "Bundesrat Draws Lessons from Credit Suisse Crisis and Specifies Measures for Bank Stability," June 6, 2025.
