Only UBS and Credit Suisse, two of the five Swiss systematically important banks, have passed the crisis planning test of FINMA with effective plans.
The assessment follows a review of the recovery and resolution plans for the country's big banks which FINMA ordered to be submitted by the end of 2019.
The review followed the implementation of Switzerland's Too Big to Fail rules, aimed at reducing risks in the country's financial system and avoiding the need for taxpayer-funded rescues.
Implementation of the Swiss too-big-to-fail regime is critically important to the stability of the financial centre"
Mark Branson, chief executive of FINMA, said: "Implementation of the Swiss too-big-to-fail regime is critically important to the stability of the financial centre." Following a review of the plans, the Swiss financial regulator conceded that only UBS and Credit Suisse had plans that could be effective in tackling a crisis situation.
FINMA said UBS met the requirements for an effective emergency plan, although certain joint and several liabilities remain excessive. Credit Suisse's emergency plan was effective, the regulator said.
The emergency plans of the other three systemically important banks - PostFinance, Raiffeisen [RFSHW.UL] and Zuercher Kantonalbank [ZKB.UL]- do not meet the statutory requirements yet, the regulator added.
More than a decade after the 2008 financial crisis, FINMA continues to pressure Switzerland's biggest banks to make clear they have the necessary capital and liquidity buffers to survive a massive financial shock. The government contributed 6 billion Swiss francs ($6.1bn) to bail out UBS in the depths of the financial crisis, a move that remains controversial.
Only functions that are critical to the Swiss economy are deemed systemically important, which includes in particular the domestic deposit and lending businesses as well as payment services. Thus, it is sometimes referred to as the Swiss emergency plan.
Credit Suisse CFO David Mathers said: "Defining a global resolution approach, addressing capital requirements and implementing structural and operational enhancements has been key to our Too Big to Fail agenda.
"Also, Credit Suisse has done pioneer work in the area of the bail-in mechanism, the new international standard to bank resolution. As of 4Q19, Credit Suisse has CHF91.3bn total loss-absorbing capacity (TLAC) with total balance sheet assets of CHF787.3bn."
The regulator was particularly unhappy with the level of preparedness of PostFinance and Raiffeisen. The pair failed to present plausible plans for a crisis scenario.
Zürcher Kantonalbank lacked an effective Swiss emergency plan but hade a "plausible plan."