Credit Suisse debacle: failings of federal authorities highlighted by the Commission of Inquiry – rts.ch

The difficulties encountered by the second largest Swiss bank are to be blamed on the board of directors and management of Credit Suisse (CS). They were reluctant to the numerous interventions of the financial market supervisory authority (Finma).

The CEP did not observe any wrongful behavior on the part of the federal authorities, it indicates in its unanimously adopted report. However, she believes that certain decisions have taken too long. According to her, it is imperative to learn lessons from crisis management.

It identified improvements to be made at the execution level and at the legislative level. She made twenty recommendations and submitted several interventions.

Delayed decisions

According to the report, the Federal Council and Parliament have attached too much importance to the requirements of systemic banking institutions within the framework of the too big to fail (TBTF) regulation. Deadlines have been extended and adaptations to international standards delayed. The Federal Council was too hesitant, particularly in the introduction of a public liquidity guarantee mechanism.

Former Finance Minister Ueli Maurer is accused of having communicated poorly with the rest of the Federal Council but also his successor, Karin Keller-Sutter. Despite Finma's alert at the end of 2022 about a possible sale of Credit Suisse, he would have minimized the seriousness of the situation during the ministerial transition.

The new Minister of Finance has not escaped criticism. The committee notes a late reaction on its part to the escalation of the crisis, particularly in the transmission of crucial information to the Federal Council.

Furthermore, the committee notes that Finma's supervision has only had a limited effect. Credit Suisse has had one scandal after another, despite warnings. The committee regrets that at the time, the supervisory authority did not withdraw the certificate of impeccable activity. It even granted vast reductions, which had an impact on equity.

Lack of information

These reductions notably contributed to a poorly coordinated intervention subsequently. If the level of information had been identical for all stakeholders, including the Federal Council, the authorities could have intervened as early as autumn 2022 to restore confidence.

In its report, the CEP nevertheless welcomes the preliminary work of analysis of the different crisis exit scenarios. Although the federal authorities were surprised by the banking crisis in the United States, they were able to maintain the solvency of Credit Suisse during the few days between March 15 and the takeover by UBS on March 19. This helped avert a global financial crisis.

Too big to fail

This is already the second time that the State has had to intervene to prevent the bankruptcy of a systemically important bank. And Switzerland now has only one bank of global systemic importance, recalls the CEP.

According to her, TBTF legislation is too focused on Switzerland, especially with regard to emergency plans. The liquidation or restructuring plan of a systemically important bank that operates worldwide from Switzerland must absolutely take international overlaps into account.

Relief from capital and liquidity requirements should be limited. The current regulation of review supervision needs to be reviewed.

ats/ther/pa