The final months of Credit Suisse, which was under pressure to be taken over by its rival UBS in March 2023, are the subject of heated debate in the Swiss Confederation. Who is responsible for this failure? The prime suspects are now trying to clear their names.
The emergency takeover of Credit Suisse in March by its rival UBS was a publicity disaster for Switzerland's famously stable and safe financial sector.
Even if the crash was not as damaging as the 2008 collapse of Lehman Brothers in the US, the situation raises many uncomfortable questions. The most common one is: why weren't warning signs spotted? How come the bank was eventually bought by UBS in a hurry in one weekend? What happens next if UBS also finds itself in a bind?
Everyone agrees on one thing: Several successive managers did a very poor job in the years leading up to the bank's collapse.
Investors lost confidence in the bank after a series of scandals and commercial mistakes led to a catastrophic exodus of customers from fall 2022 to March 2023, who withdrew their deposits en masse. And what about the government agencies responsible for overseeing banks that are "too big to fail": the Swiss Financial Market Supervisory Authority (FINMA), the Swiss National Bank (SNB), the Ministry of Finance and members of parliament.
FINMA published a detailed report on its interaction with Credit Suisse, which can be summarized as follows: "We have done our best, but our powers are too limited to be truly effective."
The regulator has repeatedly called for powers to fine, name and shame, limit excessive salaries and effectively penalize bank executives.
However, the Reuters news agency accuses FINMA of vetoing a plan to nationalize Credit Suisse about six months before its takeover by UBS.
FINMA has not responded directly to these accusations, but in its report it provides a possible explanation for its actions regarding Credit Suisse: "Generally speaking, a private solution is preferable to government-imposed measures" because this path is "more appropriate, more focused and more proportionate," the report states. However, the final decision rests with the Federal Council, which has opted for a different solution than nationalization, the report adds.
Some media outlets are also attacking FINMA president Marlene Amstad, accusing her of being too dictatorial and critical of her staff. She is accused of being responsible for the departure of several employees after taking office in 2021, including several directors: Mark Branson in 2021 and then Urban Angern six months after the Credit Suisse takeover.
Regardless of the internal situation at FINMA, the body is currently operating under an interim director, while demanding greater powers.
The Swiss National Bank also claims to have done everything it could, including providing Credit Suisse with several hundred billion francs in emergency loans and ensuring the smooth acquisition of UBS. It also played a fundamental role in the success of this acquisition by enlisting the support of other countries' central banks.
Unlike FINMA, the SNB is not asking for an expansion of its powers. On the contrary, its president, Thomas Jordan, wants to limit the bank's direct involvement in commercial bank failures, especially the risk of losses associated with bailout plans.
His message is clear: emergency funding can be offered, but only if it is guaranteed by commercial bank assets or taxpayers' money.
SNB declined to comment on a Reuters report that FINMA vetoed a recommendation to temporarily nationalize Credit Suisse in the fall of 2022.
Ministry of Finance
In the final months of Credit Suisse's existence, two finance ministers succeeded each other: Ueli Maurer until the end of 2022 and Karin Keller-Sutter from the beginning of 2023. Of the two, it was Ueli Maurer who was most criticized, as he had been in office since 2016 and was the only person capable of ending Credit Suisse's decline.
The media accused Ueli Maurer of keeping the Federal Council in the dark about the true gravity of the situation and even canceled the November 2022 meeting where he had planned to discuss the issue with its members.
He later admitted that he avoided passing on certain information for fear of leaks and damage to his reputation.
The media speculated that Ueli Maurer and Karin Keller-Sutter were opposed to nationalizing the bank, even temporarily, because of the federal parliamentary elections in October 2023.
Parliament has also received a fair amount of negative comments for failing to put in place an adequate structure to deal with the failure of such a large bank.
Some measures have been taken, such as increasing mandatory capital reserves for large banks. But no legislation was passed for state emergency funds when they were most needed. Temporary measures were taken as a matter of urgency in March.
Parliamentarians have also been accused of listening too closely to bank lobbyists, who have called for government restraint in taking action against "too big to fail" banks and in determining FINMA's powers.
Lack of coordination
Another area of criticism concerns how the institutions cooperated during the crisis.
FINMA, the SNB and the Ministry of Finance "protected their own interests above all else," writes Dirk Schütz, editor-in-chief of the business magazine Bilanz, in his book Too Close to the Wind: Why Credit Suisse Had to Sink.
"It is important that all those involved in the Credit Suisse crisis act as transparently as possible. But it is even more important that responsibility for the next banking crisis is taken. Therefore, the cooperation between FINMA, the Department of Finance and the Swiss National Bank must be improved," the Zurich-based newspaper Tages Anzeiger said in an editorial.
The Swiss Bankers Association also stated that "it is important to optimize the cooperation between the Federal Department of Finance, the SNB and FINMA and to better clarify the division of responsibilities in the event of a future crisis." In addition, it is crucial to address these problems before they get out of hand. Switzerland still has one major international bank, UBS, with a $1 600 billion fortune, which is twice Switzerland's annual gross domestic product (GDP).