The Financial Stability Board (FSB) takes a positive view of the "too big to fail" legislation in its peer review report on Switzerland, the finance ministry says.

However, the FSB does see room for improvement in certain aspects of banking supervision, such as the use of external auditors.

The FSB, which is based in Basel, deals with international financial market stability and financial market regulation issues. Member institutions include the central banks of many large economies including the United States, France and Germany. As an FSB member, Switzerland has undergone a peer review by other FSB members for the first time.

According to the report published on Wednesday, the FSB appreciates the "too big to fail” measures for banks which should enter into force in March 2012.

The reaction of the authorities during the financial crisis and the progress made on the supervision of insurance companies and pension funds were also positively highlighted.

The FSB also said progress had been made on bank supervision and in particular regarding Swiss financial watchdog Finma’s operational independence and resources. But it was critical of the extensive use of external auditors.

It also suggested that cantonal banks should step up their reforms “to eliminate the state guarantee enjoyed by most cantonal banks in order to put them on an equal footing with the other banks”.

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