Stricter Oversight After Credit Suisse Collapse

By Dave Graham and Ariane Luthi
BERN (Reuters) – Swiss lawmakers have called for tighter regulation of the financial sector following the collapse of Credit Suisse. A report released on Friday, spanning 569 pages, criticized financial regulators for their secretive and ineffective response to the crisis that led to the bank's downfall in March 2023.

UBS, its main competitor, acquired Credit Suisse at a significantly reduced price under a government-backed rescue effort. In June 2023, parliament established a committee to investigate the official handling of the Credit Suisse crisis, conducting private interviews with involved parties.

The committee's report attributed the crisis primarily to years of mismanagement at Credit Suisse. It illuminated the chaotic final days of the bank and condemned the lack of transparency in the crisis discussions among key financial officials, pressing for better documentation in the future. While the report acknowledged that authorities acted to prevent a global financial crisis, it did not find misbehavior on their part.

The failure of the 167-year-old Credit Suisse left Switzerland with only one major international bank, UBS, which now dominates the financial landscape with a balance sheet larger than the country's entire economy. In April, the government proposed strategies to prevent UBS from experiencing a similar fate, focusing on increasing its capital reserves, pending the committee's findings.

The committee offered 30 broad recommendations aligned with the government's prior plans without giving specific reform advice. It urged stronger oversight of FINMA and proposed that systemically relevant banks maintain larger capital cushions during crises. It also criticized the large bonuses paid to Credit Suisse's management while the bank incurred substantial losses from 2010 to 2022.

Amid discussions regarding Credit Suisse's potential collapse, the report found that meetings among officials lacked structure and transparency. Former Finance Minister Ueli Maurer engaged in informal meetings about the bank’s condition, expressing concerns about information leaks rather than adequately informing his successor, Karin Keller-Sutter, who took office in 2023. The report concluded that the transition between officials was poorly managed and that key events leading to the bank's failure were not communicated effectively.

($1 = 0.8980 Swiss francs)