The Federal Financial Market Supervisory Authority (Finma) could not stand up to Credit Suisse and failed to impose certain changes. This is one of the findings highlighted by the parliamentary inquiry report into the collapse of the second largest Swiss bank, published at the end of the year.
Will Finma be able to prevail against UBS, which has become even larger after the takeover of its rival? It failed to change certain practices at Credit Suisse, as shown in the parliamentary investigation report published in December, which speaks of “partial ineffectiveness” of the regulator.
When it comes to small and medium-sized banks, it seems quite up to the task. She has no problem deciding and enforcing sometimes very harsh measures. It is even said of Finma that it scares the smallest establishments, which was not the case at Credit Suisse.
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American method
Another authority, the Swiss National Bank (SNB), could take responsibility for monitoring the big banks, in this case UBS. This is also how work is shared in other countries, starting with the United States where the Federal Reserve has the mission of monitoring so-called systemic or “too big to fail” banks. In Great Britain too, the distribution of tasks comes close to this model.
This is also a suggestion made by UBS itself. Its president Colm Kelleher proposed a few months ago to base itself on the American method. The BNS does not comment on a political question.
Such a solution would have several advantages. In particular the independence of the central bank, enshrined in the Constitution, which better protects it from pressure from all sides. Furthermore, in the event of a crisis, everything would happen in the same place with no problem of coordination or information sharing.
Doubts about the regulatory filter
Financial stability is already one of the tasks of the SNB, but with a vision of the system and not of individual establishments, which remain on the Finma register. The two authorities therefore regularly discuss the big banks.
During these discussions, the monetary authority expressed reservations about the famous regulatory filter, highlighted by the parliamentary inquiry. This mechanism, approved by Finma, allowed a relaxation of capital requirements, thus concealing the true financial situation of Credit Suisse in the months preceding its fall.
British model spread
But risks make such a transfer of responsibility delicate. It concentrated a lot of power in the hands of the National Bank, which already has the task of price stability. This is the main pitfall raised by the group of experts on bank stability, appointed after the Credit Suisse debacle.
He studied this avenue, in particular the British model, before ruling it out for this reason and also because he saw a danger of conflicts of interest in the different missions. Likewise, the parliamentary commission of inquiry concluded that there was no need to change the sharing of responsibilities.
But for the group of experts and the parliamentarians who led the investigation, Finma’s weaknesses are obvious. If the solution does not involve a transfer of responsibility to the SNB, it will have to be resolved in another way.
Mathilde Farine
