The recent parliamentary commission of inquiry (PUK) report on Credit Suisse has revealed that the bank's collapse was primarily due to years of mismanagement.
The report, which involved extensive hearings and analysis of over 30,000 pages of documentation, highlights the failures of both the bank's leadership and the regulatory authorities.
The PUK, chaired by Isabelle Chassot, has called for significant reforms to prevent similar crises in the future.
The PUK's investigation included testimonies from key figures such as UBS CEO Sergio Ermotti, former National Bank head Thomas Jordan, and former CS executives including Axel Lehmann and Tidjane Thiam.
The commission's findings indicate that while the federal government did not exhibit misconduct during the crisis, it failed to impose necessary regulatory limits on Credit Suisse.
The report emphasizes that the flow of information between various authorities was inadequate, which contributed to the bank's inability to navigate its challenges effectively.
The PUK's main conclusion is that the years of mismanagement at Credit Suisse are the root cause of its downfall.
The report criticizes the bank's top management, particularly former CEOs Tidjane Thiam and Thomas Gottstein, for their failure to comply with regulatory demands from the Swiss Financial Market Supervisory Authority (FINMA).
Despite repeated requests for transparency regarding significant transactions, Credit Suisse's leadership did not provide the necessary information, leading to a series of enforcement proceedings against the bank.
Moreover, the report highlights the troubling trend of excessive bonuses awarded to high-ranking executives during a period marked by substantial financial losses.
Between 2010 and 2022, Credit Suisse's management received bonuses totaling CHF 39.8 billion, while the bank incurred losses of CHF 33.7 billion.
This disparity raises questions about the incentives that drove decision-making within the institution, particularly in light of the significant fines and settlements that amounted to around CHF 15 billion during the same timeframe.
The PUK report does not shy away from criticizing FINMA, noting that the authority has repeatedly made demands for regulatory compliance that it has failed to enforce effectively.
Despite identifying numerous issues within Credit Suisse's business practices, FINMA was unable to instigate meaningful changes, allowing the bank's management to continue operating without addressing the underlying problems.
This lack of enforcement has raised concerns about the effectiveness of financial oversight in Switzerland.
In light of these findings, the PUK has made twenty recommendations aimed at improving financial market supervision and enhancing cooperation among regulatory authorities.
The commission's proposals align with previous initiatives presented by Federal Councillor Karin Keller-Sutter in the "Too big to fail" report.
Key recommendations include the cessation of bonus payments during periods of poor bank performance and improvements in the flow of information within the Federal Council.
The report also emphasizes the need for better documentation and transparency in the deliberations of various committees, which have been criticized for their lack of clarity.
Former Finance Minister Ueli Maurer has also come under scrutiny in the PUK report.
The investigation indicates that his tenure marked a shift in the regulatory environment for FINMA, complicating the authority's ability to enforce compliance among financial institutions.
The report suggests that increased lobbying efforts by banks against stricter regulations coincided with a decline in the independence of FINMA's regulatory activities.
The PUK's findings underscore the importance of strong political leadership in maintaining the integrity of financial oversight.
The report calls for a reassessment of the relationship between regulatory authorities and the financial sector to ensure that the necessary safeguards are in place to prevent future crises.
The commission's recommendations aim to restore confidence in Switzerland's financial regulatory framework and enhance the resilience of its banking system.
The PUK report on Credit Suisse serves as a reminder of the consequences of mismanagement and regulatory complacency in the financial sector.
The recommendations put forth by the PUK highlight the need for reforms that prioritize accountability and transparency within both the banking industry and its regulators.
The lessons learned from the Credit Suisse debacle will be instrumental in shaping future policies and practices to ensure the long-term stability of Switzerland's financial markets.