The banking regulator was ineffective in preventing the Credit Suisse debacle

Failures pointed out. The Swiss policeman of the financial markets showed himself incapable of preventing the mistakes of the directors of Credit Suisse, a global financial crisis in 2023 having only been narrowly avoided thanks to the intervention of the Swiss authorities, affirmed Friday a commission of ‘investigation.

After almost eighteen months of investigation, this commission estimated that the board of directors and management of Credit Suisse are the “responsible for the loss of confidence in the bank”its report not having identified “no wrongdoing” from the Swiss authorities. They even allowed “to avoid an international financial crisis”according to this report of more than 500 pages which nevertheless expresses numerous criticisms, in particular against Finma, the banking supervisory authority in Switzerland.

This commission, set up less than three months after the rescue of the former second largest bank in Switzerland, deplores in its report “partial inefficiency” of Finma, including before the panic movement on the markets of March 2023. She says she does not understand that Finma granted in 2017 “vast capital relief”without which the bank would have “already had difficulty meeting regulatory requirements” four years later, in 2021, and “would have been absolutely incapable of doing so from 2022”. Finma had launched numerous procedures and warnings against the bank, recognizes this commission, which also notes that the managers of Credit Suisse had shown themselves “reluctant” with regard to his interventions. But she regrets, “than at the time”Finma did not take away “the certificate of irreproachable activity” which banks need to operate in Switzerland, indicates the press release accompanying its report.

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“Too much importance” given to banks’ requests

Parliamentary commissions of inquiry are extremely rare in Switzerland. This is only the fifth in the history of Parliament. This commission was tasked with investigating the role of Swiss authorities in the rescue of Credit Suisse, going back to 2015 to analyze the factors that led to its downfall. In March 2023, the Ministry of Finance, the central bank and Finma met to quickly find a solution after panic in the wake of the bankruptcy of three American banks. The Swiss authorities had opted for a takeover by its competitor UBS.

This commission, which interviewed 79 people and analyzed more than 30,000 pages of documents, also criticized the rules applicable to banks considered too big to fail, considering that the government and Parliament had granted a “too much importance” at the demands of the big banks.

Tighten the rules

She criticizes an implementation “hesitant” rules for these so-called systemically important banks, which must comply with stricter requirements given their weight in the economy. According to this commission, it is necessary “must learn lessons” of this crisis, especially since the State had already had to intervene in 2008 to come to the aid of UBS and Switzerland “now has only one globally systemically important bank”. The merger of two of the country’s largest banks has created a colossus that is causing significant concern in the Alpine country where many are wondering about future options in the event of a crisis. However, at the annual general meeting in April, UBS Chairman Colm Kelleher said he “concerned” by the tightening of rules which is looming, warning that the bank risks being penalized compared to its international competitors.

The fall of Credit Suisse was due to “a crisis of confidence”, “hard to win and quickly lost”he explained. But “trust cannot be regulated”he argued. The Swiss Association of Bank Employees, on the other hand, called for more resources to supervise the banks, affirming in a press release that the collapse of Credit Suisse is above all due to “a few unscrupulous senior managers”with “once again” the staff “who pays the bill”.