Swiss regulator calls for more power after Credit Suisse turmoil

FINMA CEO Urban Angehrn (left), president Marlene Amstad (centre) and media spokesperson Tobias Lux give a press conference in Bern on April 5, 2023. © Keystone / Peter Klaunzer

The Swiss Financial Market Supervisory Authority (FINMA) wants more power to sanction and name and shame banks that break the rules, following the Credit Suisse collapse.

“Our instruments hit their limits in extreme cases as seen in the case of Credit Suisse,” FINMA President Marlene Amstad told reporters in Bern on Wednesday. Amstad said it would be worth developing these powers.

“FINMA has no power to fine,” she said, adding that she would welcome such a power. “It’s an exception when compared with other regulators.”

+ How the Swiss ‘trinity’ forced UBS to save Credit Suisse

Following years of scandals and crippling losses, the Swiss government invoked emergency powers to push through the sale of 167-year-old Credit Suisse to rival bank UBS on March 19.

Urban Angehrn, chief executive of FINMA, told reporters at the press conference that the merger with UBS was “the best option” and one that “minimised risk of contagion and maximised trust”.

He said two other options — a takeover by the Swiss government or putting Credit Suisse into insolvency proceedings — had serious drawbacks.

+ Where did it all go wrong at Credit Suisse?

Insolvency would have left the functional parts of Credit Suisse in operation as a Swiss-only bank, but one with a “damaged reputation” through bankruptcy, he told reporters. A temporary takeover by the Swiss government would have exposed taxpayers to the risk of losses.

“One can well imagine, what devastating effect the insolvency of a big wealth management bank of Credit Suisse would have had on Swiss private banking,” Angern said. “Many other Swiss banks could have faced a bank run, just as Credit Suisse did itself in the fourth quarter.”

+ Credit Suisse shareholders reject executive pay request

At the Credit Suisse shareholder meeting in Zurich on Tuesday, chair Axel Lehmann apologised on behalf of himself and others who were “behind the wheel” when Switzerland’s second biggest bank was forced to concede defeat last month.

During the meeting, Credit Suisse shareholders lined up to express their anger and frustration at the bank’s impending demise by voting down a proposed CHF34 million ($37 million) pay package for managers.

On Wednesday, UBS executives told shareholders at a separate meeting that its takeover of Credit Suisse was a milestone for the industry and a major challenge for the bank.

Describing the transaction as “the first merger of two globally systematically important banks,” UBS Chair Colm Kelleher sought to assure investors saying it also meant “a new beginning and huge opportunities ahead for the combined bank and for the Swiss financial centre as a whole.”

In other developments, the Financial Times reported on Sunday that the Swiss Office of the Attorney General had opened an investigation into the state-backed takeover of Credit Suisse by UBS.

FINMA has also announced a probe into the conduct of Credit Suisse top brass. The regulator is investigating whether top management can be held to account for the bank’s debacle, its president told the NZZ am Sonntag newspaper on March 26.

“We are not a criminal authority, but we are exploring the possibilities,” Amstad said.