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Swiss lawmakers have put Credit Suisse’s failure down to “years of mismanagement” by its leaders and criticised the country’s financial regulator Finma for granting it relief from capital requirements in the years before its collapse.
The landmark political inquiry, only the fifth in Switzerland’s history, stopped short of apportioning blame to regulators for the failure of one of its largest banks.
However, it criticised Finma for giving Credit Suisse relief on the amount of capital it had to hold under a so-called regulatory filter, which in effect allowed the bank to inflate the value of its foreign subsidiaries, calling the move in 2017 “incomprehensible”.
Despite admonishing Finma, the report also acknowledged that Swiss authorities prevented a global financial crisis when they orchestrated the bank’s sale to UBS and pinned most of the blame on Credit Suisse bosses.
“The responsibility for the loss of confidence in [Credit Suisse] and its precarious situation, which threatened its existence in March 2023, lies with its board of directors and management in recent years,” the commission said. “They have shown themselves to be recalcitrant to numerous interventions by Finma.”
The commission, known by its acronym PUK, carried out its work behind closed doors and examined whether Swiss authorities acted properly in the crisis, which led to the state-engineered rescue of Credit Suisse by rival UBS last year.
It was set up shortly after the deal with UBS was brokered in March 2023 and is only the fifth parliamentary commission ever established to investigate the Swiss executive branch, and the first in almost three decades.
The report is set to influence the future regulation of UBS, which has been at loggerheads with the Swiss establishment in recent months over proposed new rules that would significantly increase its capital requirements for its foreign subsidiaries.
The PUK called for “more effective provisions for systemically important banks” in Switzerland. It also said that the country’s “too big to fail” legislation for lenders focused too much on Switzerland, was not designed for a crisis of confidence, and neglected important market indicators.
Since Credit Suisse’s demise, the Swiss government and Finma have been weighing a range of measures to improve stability in the Swiss financial system, whose reputation was hit by the failure of the 167-year-old lender.
The measures being considered include imposing additional capital requirements on UBS and handing more power to Finma.
In April, the Swiss Federal Council proposed measures such as requiring banks with international subsidiaries to hold additional capital.
While it did not explicitly say how the new capital requirements would be calculated, analysts have estimated that UBS could be ordered to hold between $15bn and $25bn of additional capital under the new regime.
“Any adjustment to the current [regulatory] regime must be targeted, proportionate and internationally aligned, balancing financial stability and economic impact,” UBS said in a statement.
UBS added that the PUK report confirmed that Credit Suisse’s collapse was “driven by years of strategic errors, mismanagement and reliance on substantial regulatory concessions”.
The report also shed light on the tumultuous process that preceded the announcement of the rescue deal.
This included demands made by UBS during negotiations, alternative scenarios considered by Swiss authorities and how the country’s Federal Council turned to encrypted messaging app Threema in a bid to keep details under wraps as the crisis escalated.
The PUK said UBS wanted long-running concessions on equity and liquidity requirements. The bank also demanded that Finma, the Swiss National Bank and the finance department take part in a press conference on the day its rescue of Credit Suisse was announced.
Swiss authorities also toyed with the idea of the temporary nationalisation of Credit Suisse from March 2023, according to the report.
