Axel Lehmann, President of Credit Suisse Group AG, Colm Kelleher, President of UBS Group AG, Karin Keller-Sutter, Swiss Finance Minister, Alain Berset, Swiss President, Thomas Jordan, President of the Swiss National Bank (SNB), Marlene Amstad, Chairman of the Swiss Federal Bank Financial Markets Authority (FINMA), from left to right, during a press conference in Bern, Switzerland, on Sunday, March 19, 2023.
Pascal Mora | Bloomberg | Getty Images
The Swiss Financial Market Supervisory Authority (FINMA) said in a report on Tuesday that, together with the government and the Swiss National Bank, it had achieved the goal of securing Credit Suisse's solvency and ensuring financial stability.
She also referred to the “far-reaching and intrusive measures” taken in recent years to monitor the bank and to “correct deficiencies, particularly in the bank’s corporate governance as well as in risk management and risk culture”.
From summer 2022, FINMA also called on the bank to “take various measures to prepare for an emergency” – a warning that apparently went unheeded.
“FINMA draws a number of lessons in its report. On the one hand, it calls for a stronger legal basis, in particular instruments such as the senior managers regime, the power to impose fines and stricter rules on corporate governance,” the regulator said.
“On the other hand, FINMA will also adapt its supervisory approach in certain areas and strengthen its review of the readiness for implementation of stabilization measures.”
FINMA said Credit Suisse's announced strategic changes to reduce risk, such as downsizing its investment bank, focusing on its asset management business and reducing its earnings volatility, were “not consistently implemented”, while “recurring scandals undermined the bank's reputation”.
It also found that variable remuneration remained high even in years when the bank recorded high financial losses and shareholders made little use of opportunities to influence salary packages.
According to its own information, the supervisory authority carried out 43 preliminary investigations against Credit Suisse with a view to possible enforcement proceedings between 2012 and the bank's emergency rescue. Nine reprimands were issued, 16 criminal charges were filed and 11 enforcement proceedings were initiated against the bank and three against private individuals.
FINMA said it had repeatedly informed Credit Suisse about risks, recommended improvements and imposed “far-reaching measures.” These included “extensive capital and liquidity measures, interventions in the bank’s governance and remuneration and restrictions on business activities”.
“In the period from 2018 to 2022, it also carried out 108 on-site supervisory audits at Credit Suisse and identified 382 areas requiring action,” FINMA said.
“In 113 of these points the risk was classified as high or critical. These figures and measures make it clear that FINMA has exhausted its options and legal powers.”
At the time of the collapse, Credit Suisse bosses attributed the loss of confidence to market panic caused by the collapse of Silicon Valley Bank in the US
Credit Suisse was asked in the summer to take measures to prepare for the crisis, such as selling partial business and, in the event of an existential emergency, the possible sale of the entire bank.
The regulator therefore called for “expanded options that would allow it to have more influence on the governance of the supervised institutions.”
These include the introduction of a senior managers regime, powers to impose fines and the ability to regularly publish enforcement proceedings.
“In order for FINMA to be able to intervene effectively in the remuneration systems, a stronger legal mandate is required,” it concludes.