Capital Adequacy Ordinance (CAO)
English is not an official language of the Swiss Confederation. This translation is provided for information purposes only and has no legal force.
Chapter 1 General Provisions
Section 1 Subject Matter
Art. 95 Risk concentrations and other large credit exposures
1 A risk concentration exists when the total exposure to a counterparty or group of connected counterparties equals or exceeds 10% of the bank's adjusted eligible Tier 1 capital under Articles 31 to 40. 2 Banks must identify and monitor risk concentrations and other large credit exposures to an individual counterparty or group of connected counterparties, and comply with associated reporting obligations.
Art. 95 — Amended by No I of the O of 22 Nov. 2017, in force since 1 Jan. 2019 (AS 2017 7625).
Art. 96 Recordable exposures and total exposure
1 For the purposes of identifying and monitoring risk concentrations, all on- and off-balance sheet items in the banking book and trading book that carry a credit exposure or counterparty credit exposure to an individual counterparty or group of connected counterparties must be recorded. 2 The recorded exposures must be aggregated to arrive at a total exposure figure. 3 The following do not need to be included in the calculation of total exposure: a. exposures that can be deducted from Tier 1 capital in accordance with Articles 31 to 40: the amount of the deduction; b. intraday exposures to banks. 4 Exposures that are assigned a 1,250% weight in the minimum capital calculation shall be included in the total exposure. 5 The total exposure to a group of connected counterparties is the sum of the total exposures to the individual counterparties.
Art. 96 — Amended by No I of the O of 22 Nov. 2017, in force since 1 Jan. 2019 (AS 2017 7625). Para. 4 — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13).
Section 2 Upper Limits on Risk Concentrations
Art. 97 Upper limit on individual risk concentrations
1 A risk concentration may not exceed 25% of adjusted eligible Tier 1 capital under Articles 31 to 40. 2 This limit shall not apply to: a. exposures to central banks, central governments and supranational organisations; b. exposures with an explicit guarantee from counterparties under letter a; c. exposures secured by financial collateral from counterparties under letter a; d. exposures to qualifying central counterparties resulting from clearing services. 3 The exposures shall be calculated in accordance with Article 119 paragraph 3.
Art. 97 — Amended by No I of the O of 22 Nov. 2017, in force since 1 Jan. 2019 (AS 2017 7625). Para. 2 let. a — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13).
Art. 98 Upper limit on risk concentrations vis-à-vis banks
For banks in categories 4 and 5 under Annex 3 BankO, the upper limit on individual risk concentrations vis-à-vis non-systemically important banks, and vis-à-vis securities firms that are allocated to the «banks» exposure class under Article 68 paragraph 1, shall be 100% of the adjusted eligible Tier 1 capital under Articles 31 to 40.
Art. 98 — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13). SR 952.02
Art. 99 Upper limit breaches
1 The upper limit on risk concentrations must not be breached, except in the cases specified in paragraphs 2 and 3. 2 A limit breach is permitted if this is related to the settlement of client payment transactions and lasts for no more than five business days. 3 A limit breach is also permitted if this results solely from the affiliation of previously independent counterparties or the affiliation of a bank with other financial sector entities. 4 The amount by which the limit may be breached owing to an affiliation under paragraph 3 may not be actively increased further. The breach must be rectified within two years of the affiliation acquiring legal force.
Art. 99 — Amended by No I of the O of 22 Nov. 2017, in force since 1 Jan. 2019 (AS 2017 7625).
Section 3 Reporting Obligations relating to Risk C
Amended by No I of the O of 22 Nov. 2017, in force since 1 Jan. 2019 (AS 2017 7625).
Art. 100 Reporting risk concentrations and other large credit exposures
1 The bank shall report all outstanding risk concentrations and other large credit exposures to its body responsible for overall management, supervision and control: a. quarterly on an individual entity basis; b. semi-annually on a consolidated basis. 1bis It shall use the financial statements prepared in accordance with the accounting standards prescribed by FINMA as a basis for reporting. FINMA shall regulate exceptions, where this is necessary for the appropriate measurement of risk concentrations and other large credit exposures as part of risk diversification. 2 The reports must be submitted to the statutory banking audit firm and FINMA within six weeks of the end of the quarter or half-year, using the form prescribed by FINMA. 3 The following reference dates shall apply for the reports: a. total exposure: last day of the current quarter and half-year; b. Tier 1 capital: last day of the current or preceding quarter and half-year. 4 Specifically, the following shall be reported: a.
Para. 1bis — Inserted by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13). Para. 2 — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13).
Art. 101 Reporting of unauthorised limit breaches
If the bank observes that a risk concentration has breached the upper limit without the existence of an exception under Article 99, it must notify its audit firm and FINMA immediately and rectify the breach in a timely manner. The deadline for rectification shall be approved by FINMA. Upper limit breaches caused by the use of the trade date principle and arising out of transactions having a settlement date (value date) within the next two business days, or three business days as a result of foreign bank holidays, shall be exempt from the duty to report immediately.
Art. 101 — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13).
Art. 102 Reporting of intra-group exposures
The bank must draw up a report on intra-group exposures under Article 111a on a quarterly basis and submit the report to the audit firm, FINMA and the body responsible for overall management, supervision and control, together with the report on outstanding risk concentrations under Article 100. A distinction must be made between group companies under Article 111a paragraphs 1 and 3.
Art. 102 — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13).
Section 4 Calculation Principles
Art. 103 Firm commitments to underwrite securities
The issuer-specific exposures for firm commitments to underwrite securities must be calculated as follows: a. sub-participations and firm subscriptions may be deducted from firm commitments to underwrite debt and equity securities, provided that this eliminates the bank's associated market risk. b. the resulting amount must be multiplied by one of the following credit conversion factors: 1 0.05 as of the day on which the firm commitment to underwrite is irrevocably entered into, 2 0.1 on the issue's payment date, 3 0.25 on the second and third business day after the issue's payment date, 4 0.5 on the fourth business day after the issue's payment date, 5 0.75 on the fifth business day after the issue's payment date, 6 1 as of the sixth business day after the issue's payment date.
Art. 104 and 105
Repealed by No I of the O of 22 Nov. 2017, with effect from 1 Jan. 2019 (AS 2017 7625).
Art. 106 Exposures from unsettled transactions
Transactions that remain unsettled after five business days (Art. 77f) must be included in the total exposure figure at their full exposure value.
Art. 106 — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13).
Art. 107 and 108
Repealed by No I of the O of 22 Nov. 2017, with effect from 1 Jan. 2019 (AS 2017 7625).
Art. 109 Groups of connected counterparties
1 A group of connected counterparties comprises: a. counterparties between which there is a control relationship or economic interdependence; b. counterparties that are held as participations by the same person, or are directly or indirectly controlled by them; or c. counterparties that form a consortium. 2 Groups of connected counterparties shall be treated as one entity. 3 If the total exposure to a single counterparty exceeds 5% of eligible Tier 1 capital, it must be verified, within three months and at appropriate intervals thereafter, whether counterparties are economically interdependent. 4 Central counterparties do not constitute a group of connected counterparties if the exposures to them are related to clearing services. 5 Legally independent public enterprises together with their controlling public sector entity do not constitute a group of connected counterparties if: a. the public sector entity is not legally liable for the enterprise's obligations; or b. the enterprise in
Art. 109 — Amended by No I of the O of 22 Nov. 2017, in force since 1 Jan. 2019 (AS 2017 7625).
Art. 110 Exposures to a consortium
1 Exposures to a consortium shall be allocated to the individual consortium members according to their participating interest. 2 In the case of joint and several liability, the bank must recognise the entire exposure to the consortium member to which it assigned the highest credit rating during the lending decision.
Art. 111 Exposures of group companies
From the perspective of each bank in the financial group or financial conglomerate, group companies shall constitute a group of connected counterparties.
Art. 111a Intra-group exposures
1 If a bank is part of a financial group or financial conglomerate subject to appropriate consolidated supervision, the intra-group exposures to group companies that are fully integrated into the consolidated capital and risk diversification may be excluded from the upper limit under Article 97 if the group companies: a. are individually subject to appropriate supervision; or b. act as counterparty only to group companies that are individually subject to appropriate supervision. 2 FINMA is authorised to issue implementing provisions to appropriately restrict the exclusion of intra-group exposures under paragraph 1. 3 Intra-group exposures to other group companies shall be subject, on an aggregate basis, to the regular limit of 25% of the adjusted eligible Tier 1 capital under Articles 31 to 40.
Art. 111a — Inserted by No I of the O of 22 Nov. 2017, in force since 1 Jan. 2019 (AS 2017 7625).
Section 5 Easing and Tightening of Requirements
Art. 112
1 FINMA shall regulate the extent to which the risk diversification requirements may be relaxed for banks in categories 4 and 5 under Annex 3 BankO. 2 In special cases, it may also relax or tighten the risk diversification requirements. Specifically, it may: a. set lower reporting limits or upper limits for individual total exposures; b. impose upper limits on a bank's direct and indirect real estate holdings; c. subject to prior request, allow the upper limit to be breached temporarily; d. declare that the exemption from the upper limit under Article 111a paragraph 1 does not apply to some or all group companies, or extend the exemption to cover individual group companies that do not meet the criteria under Article 111a paragraph 1; e. exempt individual group companies that do not operate in the financial sector from inclusion in the aggregate exposure under Article 111a paragraphs 1 and 3; f. exempt the participations excluded from consolidation under Article 9 paragraph 1 from inclu
Art. 112 — Amended by No I of the O of 22 Nov. 2017, in force since 1 Jan. 2019 (AS 2017 7625). Para. 1 — SR 952.02
Chapter 2 Calculation of Total Exposure
Amended by No I of the O of 22 Nov. 2017, in force since 1 Jan. 2019 (AS 2017 7625).
Section 1 Weighting
Art. 113
1 Counterparty exposures shall be assigned a risk weight of 100% as a rule. 2 The following exposures are to be weighted differently to paragraph 1: a. exposures to cantons rated 1 or 2 under Annex 2: 20%; b. exposures in domestic Pfandbrief bonds issued in accordance with the Mortgage Bond Act of 25 June 1930: 10%; c. exposures in covered bonds under Article 118 paragraph 1 letter c: at least 20%.
Para. 2 let. a — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13). Para. 2 let. b — SR 211.423.4
Section 2 Addition
Art. 114
To calculate the total exposure to a counterparty, the associated exposures in the trading book and in the banking book shall be added together. Short exposures in the trading book must not be offset against long exposures in the banking book.
Section 3 General Exposure Calculation
Art. 115 Calculating exposures for transactions with counterparty credit risk
1 For counterparty credit risk purposes, the exposure values for derivatives with long settlement periods in the banking or trading book must be calculated in accordance with Articles 57 and 58. 2 For non-linear derivatives in the trading book, the exposure value shall additionally include the credit risk of the underlying assets, assuming a complete loss of value. 3 The exposure values for securities financing transactions in the banking or trading book shall be calculated using either the simplified or the comprehensive approach (Art. 62); model-based approaches are not permitted. FINMA shall issue technical implementing provisions. It shall base these on the Basel Minimum Standards on large exposures (LEX).
Art. 115 — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13). Para. 3 — The LEX is listed in Annex 1 No 8.
Art. 116 Other balance sheet exposures
For balance sheet exposures in the banking book that are not covered by Article 115, the carrying value stated in the accounts shall apply. Individual value adjustments may be deducted. Alternatively, the bank may also use the gross value without deducting individual value adjustments and value corrections.
Art. 116 — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13).
Art. 117 Off-balance sheet exposures
1 Off-balance sheet exposures in the banking book shall be converted to their credit equivalent using the credit conversion factors under Annex 1a, but at least a factor of 0.1. Individual provisions may be deducted. 2 For irrevocable loan commitments as part of a syndicated loan, the following credit conversion factors shall be applied: a. 0.1 from the time at which the bank provides the commitment, up to the time of acceptance and confirmation by the counterparty; b. 0.5 from the time at which the counterparty accepts the bank's commitment, up to the start of the syndication phase; c. 0.5 for the non-syndicated portion during the syndication phase, and 1 for the planned equity contribution; d. 1.0 for the entire non-syndicated portion after 90 days (residual risk).
Para. 1 — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13).
Art. 118 FINMA's implementing provisions on calculating the different exposures
1 FINMA shall regulate the calculation of: a. exposures in the trading book; b. exposures to central counterparties; c. exposures in covered bonds; d. exposures in collective investment schemes, securitisations and other investment structures; e. other exposures. 2 It shall base this on the LEX. It shall provide for less stringent requirements for banks in categories 3 to 5 under Annex 3 BankO.
Para. 2 — The LEX is listed in Annex 1 No 8. Para. 2 — SR 952.02 Para. 2 — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13).
Section 4 Risk Mitigation
Art. 119
1 The following may be included in the total exposure calculation: a. netting; b. guarantees; c. credit derivatives; d. financial collateral recognised under the BIS SA. 2 Upon request, the banks must demonstrate to the audit firm or to FINMA that these risk mitigation instruments are legally enforceable in the jurisdictions concerned. 3 FINMA shall issue technical implementing provisions. It shall base these on the LEX. In so doing, it shall ensure that: a. double-counting of financial collateral is avoided when calculating the credit equivalents and during risk mitigation; b. the hedging effect of credit default swaps is appropriately reduced in line with their complexity. 4 In addition, it may provide for less stringent requirements: a. if the upper limit for risk concentrations is breached only temporarily; b. with regard to the recording of indirect exposures whose credit risk is reduced by financial collateral.
Para. 1 let. d — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13). Para. 3 — The LEX is listed in Annex 1 No 8. Para. 3 let. b — Amended by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13). Para. 4 let. b — Inserted by No I of the O of 29 Nov. 2023, in force since 1 Jan. 2025 (AS 2024 13).
Art. 120–123
Repealed
