The recent report from the parliamentary commission of inquiry (PUK) has revealed a troubling narrative regarding the Swiss authorities' handling of the Credit Suisse (CS) crisis.
The document highlights a series of failures by the Federal Council, the Swiss Financial Market Authority (FINMA), and the Swiss National Bank (SNB), revealing a lack of coordination and trust that ultimately contributed to the downfall of Credit Suisse.
The authorities, who initially portrayed their actions as a heroic rescue operation, are now facing scrutiny for their chaotic and delayed crisis management.
The PUK report contradicts the self-congratulatory narrative that emerged following the emergency takeover of Credit Suisse by UBS in March 2023.
While officials claimed that the maneuver was a well-planned effort to save the Swiss economy, the inquiry exposes a different reality.
The authorities were characterized by hesitation and a failure to act decisively, leading to a situation where the urgency of the crisis was not fully recognized.
This lack of a unified response among the key players—FINMA, the SNB, and the Department of Finance—created an environment of mistrust that hindered effective collaboration.
The report reveals that the Swiss authorities allowed risks within Credit Suisse's balance sheet to accumulate over several years, culminating in a crisis that became apparent during a bank run in the fall of 2022.
At that critical juncture, the Federal Council lacked essential tools to bolster public confidence, such as a public liquidity backstop, which had been opposed by former Finance Minister Ueli Maurer for years.
The absence of this instrument left Credit Suisse vulnerable, and attempts to introduce it at the last minute only served to exacerbate uncertainty.
FINMA's role in the crisis has also come under fire.
The regulatory body, which had previously intervened in Credit Suisse's operations, failed to take decisive action when it mattered most.
The report indicates that FINMA acted reactively and without a comprehensive understanding of the long-term implications of its decisions.
Notably, the agency allowed Credit Suisse to obscure its financial troubles from the market, granting exemptions that enabled the bank to maintain an appearance of sufficient capitalization.
This regulatory leniency ultimately masked the severity of the bank's financial situation, delaying necessary corrective measures.
The PUK report highlights a significant breakdown in communication among the Swiss authorities during the crisis.
Protocols were often disregarded, and the flow of information was inadequate, leading to a lack of coordinated action.
Ueli Maurer, as the Finance Minister, operated in isolation, treating his colleagues with suspicion and failing to provide them with timely updates.
This culture of mistrust not only hampered collaboration but also reflected a broader issue within the Federal Council, where individual departments prioritized their own interests over collective action.
The report also notes that the SNB, while ultimately assuming its role as the lender of last resort, faced challenges in providing adequate liquidity support to Credit Suisse.
The emergency assistance offered in March 2023 was insufficient, as the bank had not prepared the necessary collateral.
The SNB's cautious approach, likely influenced by a desire to maintain its independence, may have contributed to the crisis's escalation.
The inquiry suggests that the lessons learned from this episode must be taken seriously to prevent similar failures in the future.
The PUK's findings underscore the need for accountability among the Swiss authorities.
The report criticizes FINMA for its failure to acknowledge its shortcomings, particularly regarding the regulatory filter that allowed Credit Suisse to present a misleading picture of its financial health.
The lack of transparency and admission of mistakes is a recurring theme in Swiss politics, and the inquiry emphasizes the importance of recognizing and addressing past failures to ensure a more resilient financial system.
As the financial landscape continues to evolve, the lessons from the Credit Suisse crisis serve as a reminder of the critical importance of effective regulation, transparent communication, and collaborative governance.
The PUK report calls for a thorough reassessment of the roles and responsibilities of the various authorities involved, urging them to adopt a more proactive and coordinated approach in future crises.
The hope is that by confronting these issues head-on, Switzerland can strengthen its financial framework and avoid the need for dramatic rescue operations in the future.