The Swiss Financial Market Supervisory Authority (Finma) has escalated its actions against Julius Baer Group Ltd., launching an enforcement procedure against the bank in connection with risk management failures linked to the downfall of the Signa real estate empire.
This formal step by Finma could potentially lead to severe consequences for Julius Baer, including reprimands, profit confiscation, or even the revocation of banking licenses. The regulator’s decision follows “lengthy and rigorous investigations” into the bank’s practices.
The enforcement procedure casts a shadow over the early tenure of Stefan Bollinger, Julius Baer’s new Chief Executive Officer. It also raises questions about the bank’s ability to proceed with a planned share buyback this year. The investigation centers on practices that allowed Julius Baer to accumulate a $700 million exposure to Rene Benko’s Signa property conglomerate, which has since filed for bankruptcy.
In response to the news, Julius Baer’s shares plummeted by as much as 14.6% on Monday. The bank had previously revealed losses of 586 million Swiss francs (approximately $640 million) in defaulted loans related to Signa’s collapse in 2023.
Finma’s investigation, which predates the unraveling of Benko’s real estate firms in 2023, was prompted by concerns over the insufficient separation between Julius Baer’s business and control functions. Following substantial losses on loans to Signa entities, the bank announced the closure of its private debt business responsible for these loans and subsequently terminated the employment of then-CEO Philipp Rickenbacher.
The regulatory action has implications for Julius Baer’s capital distribution plans. The bank’s executives had previously linked their ability to pay out capital to investors via a buyback program to the conclusion of Finma’s investigation. Analysts at KBW suggest that “share buybacks may be off the table in 2025,” though they see the possibility of a larger program in 2026, regardless of the Finma review’s outcome.
In light of these developments, Julius Baer has announced plans to provide a strategy update before summer, along with revised financial objectives3. The bank is also implementing cost-cutting measures, including reducing its executive board from 15 members to five and targeting an additional 110 million Swiss francs in annual cost savings. These actions could result in up to 400 job cuts in Switzerland, representing about 5% of the workforce.
As Julius Baer grapples with the fallout from the Signa collapse and faces increased regulatory scrutiny, the banking industry will be closely watching how this enforcement procedure unfolds and its potential impact on the Swiss financial landscape.
