The recent collapse of Credit Suisse, a major player in the Swiss banking sector, has prompted a thorough investigation by the Parliamentary Commission of Inquiry (PUK). This report scrutinizes the events leading up to the emergency merger with UBS, which was orchestrated by authorities in response to the bank's precarious situation. The PUK's findings reveal a troubling narrative of mismanagement, regulatory shortcomings, and a series of scandals that ultimately eroded market confidence in Credit Suisse.
The PUK's investigation focused on the last decade of Credit Suisse's operations, from 2015 until the forced merger in June 2023. While the commission was tasked with examining the actions of federal authorities, it did not delve into the management decisions made by Credit Suisse itself. The PUK aimed to uncover the underlying causes of the bank's downfall, which included a series of scandals such as aiding tax evasion and money laundering, alongside poor business performance and excessive bonuses for top executives.
The report highlights a pattern of "years of mismanagement" within Credit Suisse, which culminated in a crisis that was largely self-inflicted. By the summer of 2022, the bank was already in a precarious position, teetering on the brink of liquidation by mid-March 2023. The PUK attributes this decline to a combination of internal mismanagement and a lack of responsiveness to regulatory oversight, particularly from the Financial Market Authority (FINMA). Despite numerous interventions, Credit Suisse's management exhibited a "fundamental reluctance" to comply with regulatory directives, leading to a significant loss of confidence among investors and stakeholders.
The PUK's findings raise critical questions about the effectiveness of regulatory oversight in the Swiss banking sector. The commission criticized FINMA for its inability to enforce compliance effectively, noting that Credit Suisse made "no sustainable progress" in addressing its compliance issues, even as its financial troubles became increasingly apparent. The report indicates that the bank's management often resisted FINMA's instructions, particularly during the latter part of 2022 when the severity of the situation could no longer be ignored.
Moreover, the PUK scrutinized the "too big to fail" (TBTF) legislation, suggesting that the Federal Council and Parliament had been overly accommodating to the banking sector's concerns. This leniency, particularly in the implementation of international standards like Basel III, contributed to a regulatory environment that failed to adequately address the risks posed by large financial institutions. The commission's assessment underscores the need for a more robust regulatory framework that prioritizes financial stability over institutional interests.
The report also highlights the role of the Swiss National Bank (SNB) during the crisis. The PUK criticized the SNB for being overly cautious in its capacity as a lender of last resort. Despite significant cash withdrawals from Credit Suisse, the bank refrained from seeking emergency liquidity assistance on multiple occasions. The PUK's findings suggest a lack of proactive engagement that could have mitigated the crisis.
One of the most striking revelations from the PUK's report is the stark contrast between the performance bonuses awarded to Credit Suisse's management and the bank's financial results. Between 2010 and 2022, the total performance bonuses paid to executives amounted to CHF 39.8 billion, while the bank reported a total loss of CHF 33.7 billion during the same period. This disparity raises serious questions about the incentives driving management decisions and the overall governance structure within the bank.
The PUK's investigation also pointed to a lack of transparency and accountability in the handover of responsibilities from former Finance Minister Ueli Maurer to his successor, Karin Keller-Sutter. The report criticizes Maurer for failing to provide written documentation on Credit Suisse's situation, which hampered the new minister's ability to address the crisis effectively. This oversight highlights the importance of clear communication and information sharing among government officials, particularly in high-stakes situations involving systemically important financial institutions.
The lessons learned from this crisis will undoubtedly shape future discussions on banking regulations and the responsibilities of financial institutions in maintaining stability within the global financial system.