Parliamentary inquiry on Credit Suisse collapse blames mismanagement

CS crisis: CEP points to shortcomings on the part of the federal authorities Keystone-SDA

Credit Suisse's years of mismanagement were at the root of its downfall in March 2023, the parliamentary commission of inquiry concluded on Friday. The federal authorities were not at fault, but accumulated shortcomings at all levels.

The difficulties encountered by Switzerland’s second-largest bank can be attributed to the Board of Directors and management of Credit Suisse (CS). They were reluctant to accept the numerous interventions of the Swiss Financial Market Supervisory Authority (FINMA).

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In its unanimously adopted report, the parliamentary commission found no wrongdoing on the part of the federal authorities. However, it believes that certain decisions took too long. In its view, it is imperative to learn the lessons from the management of the crisis.

It identified improvements to be made at both the implementation and legislative levels. It has formulated twenty recommendations and tabled several interventions.

Decisions delayed

According to the report, the governing Federal Council and Parliament placed too much emphasis on the requirements of systemic banks within the framework of the too-big-to-fail (TBTF) regulation. Deadlines were extended and adaptations to international standards delayed. The Federal Council showed itself to be too hesitant, particularly when it came to introducing a public liquidity guarantee mechanism.

In addition, FINMA supervision had only a limited effect. Credit Suisse triggered one scandal after another, despite warnings. The commission regrets that, at the time, the supervisory authority did not withdraw the certificate of irreproachable activity. It even granted extensive relief, which had an impact on shareholders’ equity.

Lack of information

One of the reasons for this was the lack of coordination in the subsequent response. If the level of information had been the same for all players, including the Federal Council, the authorities could have intervened as early as autumn 2022 to restore confidence.

In its report, the commission nonetheless praises the preliminary work carried out to analyse the various scenarios for ending the crisis. Although the federal authorities were taken by surprise by the banking crisis in the United States, they were able to maintain Credit Suisse’s solvency in the few days between March 15 and the takeover by UBS on March 19. This prevented a global financial crisis.

Too big to fail

This is already the second time that the state has had to intervene to prevent the failure of a systemically important bank. And Switzerland now has only one globally systemically important bank, the commission pointed out.

In the commission’s view, TBTF legislation is too focused on Switzerland, especially where emergency plans are concerned. The liquidation or reorganisation plan of a systemically important bank operating internationally from Switzerland must imperatively take into account the international overlap. Relief from capital and liquidity requirements must be limited. Current auditing supervision regulations must be reviewed.

Adapted from French by DeepL/ac

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