The recent report from the Parliamentary Commission of Inquiry (PUK) sheds light on the events leading to the emergency takeover of Credit Suisse (CS) by UBS. This comprehensive document, resulting from an investigation, highlights the failures within CS and the regulatory bodies that oversaw its operations.
The PUK's investigation points to CS's leadership as the primary culprit behind the bank's downfall. The report identifies "years of mismanagement" by the Executive Board and Board of Directors, resulting in financial penalties and a stark contrast between executive compensation and the bank's financial health. The commission expressed concern that regulatory bodies, particularly FINMA, failed to impose adequate oversight. The report criticizes FINMA for granting CS excessive capital relief and not exercising its supervisory functions effectively, allowing the bank to engage in reckless behavior without facing timely intervention.
The PUK's findings highlight significant shortcomings in the regulatory framework governing Swiss banks. The commission criticized both the Federal Council and Parliament for their leniency towards large financial institutions, particularly in the context of "too big to fail" regulations. The report points out that Switzerland lagged behind other nations in establishing a public liquidity backstop, a crucial safety net designed to bolster market confidence in the stability of major banks.
Former Finance Minister Ueli Maurer faced scrutiny for his handling of information during the crisis. The PUK criticized his decision to hold informal meetings with key stakeholders without documenting the discussions, which left other authorities uninformed and hampered coordinated crisis management efforts.
Despite the failures leading up to the crisis, the PUK commended the efforts of those involved in managing the acute situation in March 2023. The commission acknowledged that extensive preparatory work conducted since the fall of 2022 allowed for a swift response that ultimately kept CS solvent for a crucial period. The report concluded that the decision to sell CS to UBS was the best option available under the circumstances, considering the potential financial implications for the Swiss Confederation.
In light of its findings, the PUK has put forth recommendations aimed at reforming the regulatory landscape for large banks in Switzerland. These include calls for stricter adherence to international standards and clearer guidelines for regulatory meetings. Additionally, the commission has proposed motions to enhance the powers of FINMA and the SNB, as well as to address the problematic incentives associated with executive bonuses in the banking sector.
The PUK's recommendations reflect a growing recognition of the need for a more robust regulatory framework to prevent similar crises in the future. The PUK's investigation into the collapse of Credit Suisse serves as a critical examination of the interplay between corporate governance, regulatory oversight, and crisis management in the financial sector. The findings underscore the importance of accountability and reform in safeguarding the stability of Switzerland's banking system.