In a report released today (Tuesday), the Swiss Financial Market Supervisory Authority (FINMA) has disclosed critical oversights in the supervision of Credit Suisse, citing failures in risk management, corporate governance, and risk culture. The report underscores the regulator's efforts to safeguard the bank's solvency, alongside the government and the Swiss National Bank, while drawing attention to the inadequacy of implemented measures.
Inconsistent Implementation: Critique of Credit Suisse's De-Risking Strategy
The report revealed that despite imposing "far-reaching and invasive measures" over the years, the regulator's warnings, particularly those issued from summer 2022 onward, went unheeded. FINMA stressed the need for a stronger legal basis, advocating for instruments like the Senior Managers Regime, the power to impose fines, and stricter rules on corporate governance.
Strategic changes announced by Credit Suisse to de-risk, including downsizing its investment bank and focusing on asset management, were criticized for inconsistent implementation. The report noted that recurrent scandals undermined the bank's reputation, and even during periods of financial losses, variable remuneration remained high.
FINMA conducted 43 preliminary investigations, issued nine reprimands, filed 16 criminal charges, and initiated 11 enforcement proceedings against the bank and three individuals. The regulator repeatedly informed Credit Suisse of risks, recommended improvements, and imposed extensive measures, including capital and liquidity measures and interventions in governance and remuneration.
Despite conducting 108 on-site supervisory reviews and recording 382 points requiring action between 2018 and 2022, the report revealed that FINMA's options and legal powers were exhausted. Credit Suisse attributed its loss of confidence to market panic triggered by the collapse of Silicon Valley Bank in the U.S.
In response to the findings, FINMA called for extended regulatory options, including the implementation of a Senior Managers Regime, powers to impose fines, and the regular publication of enforcement proceedings. The report concluded that a more robust legal mandate is necessary for effective intervention in remuneration systems.
The 167-year-old firm, Credit Suisse, which is facing a series of risk management failures and scandals, was rescued by its domestic rival, UBS, in March under a deal brokered by the Swiss authorities. The report sheds light on the gravity of oversight lapses and emphasizes the pressing need for regulatory reforms in the Swiss banking sector.
Parliamentary Probe: Investigating Credit Suisse's Collapse
Earlier, Finance Magnates reported that a 14-member parliamentary commission launched an investigation into the collapse of Credit Suisse, occurring three months after Swiss lawmakers rejected a CHF 109 billion government rescue package for UBS to acquire the troubled bank. The investigation followed discontent among Swiss lawmakers over the emergency takeover by UBS, which bypassed parliamentary approval.
UBS recently completed the acquisition, forming a banking giant with a $1.6 trillion balance sheet. The Swiss Parliamentary Commission, headed by Isabelle Chassot, has scrutinized actions by public authorities, including the Swiss National Bank and FINMA, before and during the emergency acquisition. Key elements include SNB's CHF 50 billion credit facility to support Credit Suisse's liquidity and FINMA's $17 billion write-off in AT1 bonds. The commission has an 18-month timeframe to report findings and recommendations to the Swiss government and parliament.
