The recent report from the Parliamentary Commission of Inquiry (PUK) has placed the primary blame for the collapse of Credit Suisse squarely on the shoulders of its management. However, the findings also highlight a troubling trend of leniency from politicians and regulatory authorities towards the banking sector, particularly in the context of the powerful banking lobby.
Marlene Amstad, the President of the Swiss Financial Market Supervisory Authority (FINMA), has found herself at the center of speculation regarding her role in the downfall of Credit Suisse. Despite calls for her resignation from the Bank Employees Association, the PUK report paints a relatively favorable picture of her actions. The report, which took 18 months to compile and involved 45 meetings, suggests that while management missteps were significant, the authorities' failure to act decisively contributed to the crisis. This raises critical questions about the effectiveness of regulatory oversight in the face of a powerful banking lobby.
The PUK report identifies mismanagement at Credit Suisse as a key factor leading to its emergency merger with UBS in March 2023. The timeline of events reveals a series of missteps that began to surface in the summer of 2022, culminating in a loss of confidence that nearly triggered a global financial crisis. While the report absolves the authorities of direct misconduct, it underscores a broader issue: the submissiveness of politicians and regulators to the banking lobby, which has historically influenced regulatory frameworks.
One glaring example of this regulatory minimalism is the "too big to fail" legislation enacted in the wake of the 2008 financial crisis. Initially, Switzerland was lauded for its robust regulatory environment, but the PUK report indicates a shift towards a more accommodating stance for large banks after 2015. This "time-delayed minimalism" has been criticized for prioritizing the competitiveness of Swiss banks over the implementation of timely and effective regulations. The report suggests that this approach ultimately left Credit Suisse vulnerable to a crisis of confidence, revealing the inadequacies of a regulatory framework designed for stable conditions rather than turbulent times.
The report also scrutinizes the actions of key political figures, particularly former Finance Minister Ueli Maurer. His hesitance to convene an extraordinary Federal Council meeting to discuss a public liquidity backstop in November 2022 is highlighted as a critical error. Maurer’s decision to cancel the meeting, citing concerns over public perception, reflects a broader reluctance among Swiss authorities to confront the realities of the banking crisis. This indecision allowed the situation to deteriorate further, culminating in a rapid loss of customer confidence and the eventual emergency measures taken in March 2023.
As the crisis unfolded, it became evident that the Federal Council had repeatedly accommodated the interests of large banks, often at the expense of regulatory integrity. The PUK report notes that the "too big to fail" law was ill-equipped to handle a crisis of confidence, revealing a fundamental flaw in the regulatory architecture. The failure to act decisively in the face of mounting evidence of Credit Suisse's instability raises serious questions about the effectiveness of political oversight in the financial sector.
The implications of the Credit Suisse collapse extend beyond the immediate fallout for the bank itself. The PUK report warns that Switzerland now faces a greater cluster risk with the consolidation of UBS, which has absorbed Credit Suisse's operations. This situation underscores the need for a reevaluation of regulatory practices and a more robust framework to prevent similar crises in the future.
The indulgence shown by politicians and regulatory authorities towards the banking lobby has been described as scandalous, with the report calling for urgent reforms. The findings suggest that without significant changes to the regulatory landscape, the Swiss banking sector may remain vulnerable to future crises. The PUK's recommendations aim to address these systemic issues, emphasizing the importance of a proactive regulatory approach that prioritizes financial stability over the interests of powerful banking institutions.
As the financial world watches closely, the lessons learned from the Credit Suisse debacle will likely shape the future of banking regulation in Switzerland and beyond. The need for a more balanced relationship between regulators and the banking sector has never been more apparent, as the consequences of complacency continue to reverberate through the financial system.